Japan Hotel REIT Investment Corporation (TSE: 8985)

Financial Results
FY12/2022 (23rd Period)

Japan Hotel REIT Investment Corporation
Japan Hotel REIT Advisors Co., Ltd.
https://www.jhrth.co.jp/en/

February 22, 2023

Table of Contents
Appendix 1

Ⅰ. Settlement of Accounts ̶ Highlights
1.

FY12/2022 Highlights

3

Ⅱ. Summary of Settlement of Accounts
1.

Results for FY12/2022

52.

Operating Forecast for FY12/2023

6

Ⅲ. Status of Hotel Operations
1.

Trend of RevPAR Index and
Status of Infection by COVID-19 in Japan

8

2.

Variance Trends of Occupancy, ADR, and RevPAR

93.

Performance of The 25 Hotels with Variable Rent, etc. 10

4.

Status and initiatives of HMJ Group5.

Examples of HMJ Group's Initiatives to Increase Sales 12

6.

Rebranding and Renovation

13

7.

Internal Growth by Active Asset Management

148.

Acquisition of Property (January 2023)

15

9.

Capital Expenditure (CAPEX) and Depreciation

10. ESG Initiatives

Financial Conditions

1.

JHR's Investment Targets

27

2.

Simultaneous Pursuit of Stability and Upside Potential

28

3.

External Growth Strategy

294.

Internal Growth Strategy

30

5.

Financial Strategy

31

6.

Benefits Program for Unitholders

32

Appendix 2

Information of Properties

1.

Portfolio

34

2.

Portfolio Diversification

35

3.

Trend of Asset Size

36

4.

Rent Structures

37

5.

Property List

38

6.

Summary of Lease Contracts

40

16

7.

Portfolio Map

43

17

8.

Balance Sheet

44

11

Appendix 3

Ⅳ. Financial Conditions
1.

JHR's Characteristics and Strategy

19

Ⅴ. Market Environment
1.

Status of Domestic Accommodation Demand23

2.

Status of Inbound Visitors

24

3.

Status of New Supply of Hotels

25

1.

Major Unitholders and Classifications of Unitholders

46

2.

Changes in Investment Unit Price and Market Capitalization

47

Appendix 4

1

Investors Composition and Investment Unit Price

Summary of the Asset Management Company

1.

Summary of the Asset Management Company

49

2.

Features and Governance of the Asset Management Company 50

Ⅰ. Settlement of Accounts ̶ Highlights

1. FY12/2022 Highlights
1. Status of Hotel Operations

3. Financial Soundness▶ Performance of The 25 Hotels with Variable Rent, etc.(*1)

For FY2022, the impact of COVID-19 gradually declined, and recovery became more pronounced
toward the end of the year. RevPAR for the full year fell 38.9% in comparison to 2019. On theother hand, GOP fell 59.1% in comparison to 2019 due to rising energy costs, etc.
For FY2023, RevPAR is expected to exceed that of 2019 in the second half of the year and fall
3.5% from 2019 for the full year••

Variancevs previous
vs 2019year

Variancevs previous
vs 2019year

2019(result)

2022(result)

2023(forecast)

RevPAR (JPY)

14,1098,623+89.4%(38.9%)

13,618+57.9%(3.5%)First Half

13,286

6,063+91.4%(54.4%)

12,014+98.1%(9.6%)

Second Half

14,918

11,140+88.4%(25.3%)

15,196+36.4%+1.9%

GOP (JPY MM)

21,6978,874+274.9%(59.1%)

16,390+84.7%(24.5%)▶ Lease Agreement with HMJ Group

Changed to full variable rent scheme from February 2020 to the end of 2022
Returned to original rent scheme with fixed rent + variable rent from January 2023••

▶ Conservative Financial Management(*3)•

Strengthen lender formation by inviting new lenders•

All matured loans are fully refinanced. Investment
corporation bonds of JPY2.8Bn were issued in
September•

Refinanced in January 2023 with a 3-year term loan
(as of the end of December 2022)

LTV(total asset base)

41.4％

Costs for Interestbearing Debt

1.0％

Average Life of Debt

2.8 years

Free Cash

JPY20.9Bn

2. Changes in DPU and NAV
Changes in DPU
(JPY)
4,000
3,000
2,000
1,000

(JPY)
90,000(88.9%)(10.7%) +86.3%

410

366

(297)※

60,000(363)※

FY12/2019 FY12/2020 FY12/2021 FY12/2022 FY12/2023(20th Period) (21st Period) (22nd Period) (23rd Period) (24th Period)(Forecast)

JPY38.3Bn2023(forecast) JPY50.5Bn▶ Acquisition of GRESB Real Estate Assessment

77,525(6.9%)•

77,688+0.2%

77,361(0.4%)

682+194.0%0-1,0002,005

83,2862022(result)

4. Sustainability Initiatives

Changes in NAV per Unit

3,690

Refinancing

Received "4-star" andselected for"Sector Leader" of
Asian Hotel Sector in 2022
for three consecutive years

30,000▶ Establishment of Greenhouse Gas (GHG) Emissions
0

FY12/2019(20th Period)

FY12/2020(21st Period)

FY12/2021(22nd Period)※ Rough estimate in case gain on sale was excluded(*2)

FY12/2022(23rd Period)

Reduction Target•

30% reduction of GHG emissions per floor area(compared to FY2017) as a long-term goal by 2050(*1) The 25 Hotels with Variable Rent, etc. refers to 24 hotels: 14 hotels, which are 5 hotels of Kobe Meriken Park Oriental Hotel, Oriental Hotel tokyo bay, Namba Oriental Hotel, Hotel Nikko Alivila, and Oriental Hotel Hiroshima ("The Five HMJ Hotels"),
plus Oriental Hotel Okinawa Resort & Spa, Sheraton Grand Hiroshima Hotel (main facility of ACTIVE-INTER CITY HIROSHIMA), Oriental Hotel Fukuoka Hakata Station, Holiday Inn Osaka Namba, Hilton Tokyo Narita Airport, International Garden Hotel
Narita, Hotel Nikko Nara, Hotel Oriental Express Osaka Shinsaibashi, and Hilton Tokyo Odaiba ("The 14 HMJ Hotels"), plus 2 hotels which are Hotel Oriental Express Fukuoka Tenjin and Oriental Hotel Universal City whose lessees were replaced withsubsidiaries of HMJ in 2021 due to rebranding ("The Two HMJ Rebranded Hotels." Together with The 14 HMJ Hotels, "The 16 HMJ Hotels"), plus 4 hotels of the b ikebukuro, the b hachioji, the b hakata, and the b suidobashi ("The Ishin Group
Hotels") and 5 hotels of ibis Styles Kyoto Station, ibis Styles Sapporo, Mercure Sapporo, Mercure Okinawa Naha, and Mercure Yokosuka ("The Accor Group Hotels"). The same shall apply hereinafter.
(*2) Rough estimate calculated by excluding the amount equivalent to the gain on sale of Sotetsu Fresa Inn Shimbashi-Karasumoriguchi from the distributable profit in FY12/2020 and the amount equivalent to the gain on sale of ibis Tokyo Shinjuku fromthe distributable profit in FY12/2021 respectively.
(*3) Please refer to the footnotes on page 19 for the definition of the financial indicators.

3

Ⅱ. Summary of Settlement of Accounts

1. Results for FY12/2022[Reference]

Properties(Unit: JPY MM)

FY12/2021(22nd Period)

FY12/2022(23rd Period)

Actual(A)

Actual
(A)

41

–

–

Acquisition Price

363,542

363,542–

Operating Revenue

13,633

14,912

10,374
6,413 42.1%

61.8%

Other Income

8.4%

Variable Rent

29.8%

Gain on Sales ofProperties, etc.
NOI

(*2)

Difference from
FY2019 Actual

Actual(C)%

41

Fixed Rent

Profit and Loss

(B)–(A)FY12/2019(20th Period)

No. of Properties

Real Estate Operating
Revenue(B)–(C)%––374,508 (10,966)(2.9%)

1,279

9.4%

28,278 (13,365)(47.3%)

14,912

4,538

43.7%

28,278 (13,365)(47.3%)

6,279

(134)

(2.1%)

56.3%

15,931(9,651)(60.6%)

Variable Rent

6.6%

986

114

13.2%

4.1%

1,170

(183)

(15.7%)• The 14 HMJ Hotels

3,088 51.3%

7,646

4,558

147.6%

39.5%

11,176(3,530)(31.6%)–––

24,087 (13,124)(54.5%)

3,258

–

6,366

10,963(3,258) (100.0%)
4,596

72.2%

1.3pt

6.4%

(3.4pt)

4,804

4,787

(16)

4,557

230

1

1

0

2

(0)

16

57

41

246

(189)

NOI after Depreciation(*2)

1,544

6,116

4,571

NOI Yield after
Depreciation
Other Operating
Expenses

0.4%

1.7%

1.3pt

5.1%

(3.5pt)

1,843

1,819

(23)

2,132

(313)

Operating Income

2,959

4,296

1,336

45.2%

17,148 (12,851)(74.9%)

Ordinary Income

1,298

2,672

1,374

105.9%

15,291 (12,618)(82.5%)

1

1

–

1,296

2,671

1,374

106.0%

15,290 (12,618)(82.5%)

Use of Negative
Goodwill

335

376

41

12.3%

1,176

(68.0%)

Total Dividends

Asset Retirement
Obligations Expenses
Loss on Retirement ofNoncurrent Assets

Net Income

296.0%

19,281 (13,165)

1

16,466 (13,419)(68.3%)(JPY168MM)• Others+JPY12MM• Property sold in 2021(*3)(JPY92MM)(Total)(JPY134MM)+JPY3,739MM• The Two HMJ Rebranded Hotels+JPY265MM• The Accor Group Hotels+JPY313MM• The Ishin Group Hotels+JPY47MM• Others+JPY227MM(JPY33MM)※ Difference in total rents by hotel group vs previous year's
results(JPY MM)
Fixed
Rent

Variable
Rent

Total

(168)

+4,004+3,836The 14 HMJ Hotels–+3,739+3,739The Two HMJ
Rebranded Hotels

(168)

+265

+97

The Accor Group Hotels

–

+313

+313

The Ishin Group Hotels

+114

+47

+161

Total

(54)

+4,365+4,310

The 16 HMJ Hotels

1,634

3,046

1,411

86.3%

Number of Units Issued(Unit)

4,467,006

4,467,006––

4,462,347

4,659

0.1%

Dividend per Unit (JPY)

366

682

316

86.3%

3,690

(3,008)(81.5%)

5+JPY114MM• The Two HMJ Rebranded Hotels(Total) +JPY4,558MM

–

(799)

• The Ishin Group Hotels• Property sold in 2021

3.0%

Depreciation

Fixed Rent

(2)

872

43

Main Factors of Difference fromthe Previous Year's Results

1.8%

NOI Yield

OthersDividend

Difference fromFY2021 Actual(81.5%)(*1) For detail, please refer to Financial Report for the Fiscal Year Ended December 31,
2022 (January 1, 2022–December 31, 2022) dated February 22, 2023.
(*2) Each is calculated using the following formula: NOI (Net Operating Income) =Real estate operating revenue ­ Real estate operating costs + Depreciation +Loss on retirement of noncurrent assets + Asset retirement obligations expenses.
NOI after depreciation = Real estate operating revenue ­ Real estate operating costs(*3) Stating the impact by the sale of ibis Tokyo Shinjuku sold on December 15, 2021.
The same shall apply hereinafter.

2. Operating Forecast for FY12/2023[Reference]

Properties(Unit: JPY MM)

FY12/2022(23rd Period)

FY12/2023(24th Period)

Actual(A)

Forecast(B)

Difference from
FY2019 Actual

Actual(C)%(B)–(C)

Main Factors of Difference fromthe Previous Year's Results

%

41

42

1

–

43

(1)

–

Acquisition Price

363,542

365,592

2,050

0.6%

374,508(8,916)(2.4%)

Real Estate Operating
Revenue

42.1%

Fixed Rent
Other Income

6.6%

Variable Rent

51.3%

(6,441)(22.8%)

14,912

21,837

6,924

46.4%

28,278(6,441)(22.8%)

Variable Rent

6,279 65.6%

14,3278,047

128.2%

15,931(1,604)(10.1%)• The 14 HMJ Hotels(JPY2,941MM)• The Two HMJ Rebranded Hotels+JPY734MM• The Accor Group Hotels+JPY864MM

986

56.3%

1,005

18

1.8%

4.1%

1,170

(165)

(14.1%)

7,646 29.8%

6,504(1,141)(14.9%)

39.5%

11,176(4,671)(41.8%)• The Ishin Group Hotels(26.7%)• Others

230

4,557

460

1

1

0

2

(0)

57

11

(46)

246

(235)

6,116

12,624

6,508

19,281(6,656)

1.7%

3.5%

1.8pt

5.1%

(1.7pt)

1,819

2,058

238

2,132

(74)

Operating Income

4,296

10,5666,269

145.9%

17,148(6,582)(38.4%)

Ordinary Income

2,672

8,629

5,956

222.9%

15,291(6,661)(43.6%)

1

1

–

1

–

2,671

8,628

5,956

223.0%

15,290(6,661)

Use of Negative
Goodwill

376

330

(46)

(12.3%)

1,176

Total Dividends

3,046

8,956

5,909

194.0%

Number of Units Issued(Unit)

4,467,006

4,467,006–

Dividend per Unit (JPY)

682

2,005

1,323

NOI after Depreciation

NOI Yield after
Depreciation
Other Operating
Expenses

OthersNet Income(Total) +JPY8,047MM

4.6%

5,018

(*2)

+99MM

28,278(1.6pt)Asset Retirement
Obligations Expenses
Loss on Retirement ofNoncurrent Assets(JPY81MM)• Property acquired in January 2023(*3)

46.4%

6.4%

Depreciation+JPY8,030MM• Others

6,924

1.8pt

NOI Yield• The 14 HMJ Hotels

21,837(6,431)(*2)

Fixed Rent

14,912

24,087

NOI

Profit and Loss

(B)–(A)FY12/2019(20th Period)

No. of Properties

Operating Revenue

Dividend

Difference fromFY2022 Actual

10,963

17,656

6,692

3.0%

4.8%

4,787

61.0%

106.4%(JPY27MM)+JPY212MM• Property acquired in January 2023

+JPY15MM(Total) (JPY1,141MM)(34.5%)※ Difference in total rents by hotel group vs previous year's
results(JPY MM)
Fixed
Rent

Variable
Rent

Total

+8,030(2,207)+5,823

The 14 HMJ Hotels+8,030(2,941)+5,089The Two HMJ
Rebranded Hotels

–

+734

+734

The Accor Group Hotels

–

+864

+864

(43.6%)The Ishin Group Hotels

–

(27)

(27)

(846)

(71.9%)

Total+8,030(1,369)+6,66016,466(7,509)(45.6%)–

4,462,347

4,659

0.1%

194.0%

3,690(1,685)(45.7%)

6

The 16 HMJ Hotels(*1) For detail, please refer to Financial Report for the Fiscal Year Ended December 31,
2022 (January 1, 2022–December 31, 2022) dated February 22, 2023.
(*2) Each is calculated using the following formula: NOI (Net Operating Income) =Real estate operating revenue ­ Real estate operating costs + Depreciation +Loss on retirement of noncurrent assets + Asset retirement obligations expenses.
NOI after depreciation = Real estate operating revenue ­ Real estate operating costs(*3) Stating the impact by the acquisition of UAN kanazawa acquired on January 31, 2023.
The same shall apply hereinafter.

Ⅲ. Status of Hotel Operations

1. Trend of RevPAR Index and Status of Infection by COVID-19 in Japan
Trend of RevPAR Index(*1) of The 25 Hotels with Variable Rent, etc. in Comparison with 2019/Number of New Cases of Infection by COVID-19 in Japan

2020

2021

2022

Full Year: 34.7

Full Year: 32.3

Full Year: 61.1

First Half: 33.5

100

Second Half: 35.8

First Half: 23.8

Second Half: 39.6

First Half: 45.62023(*2)
Full Year: 96.5
First Half:
90.4

Second Half: 74.7

101.1

Second Half:

101.9

98.4
86.7

70.9
59.1

55.7
36.4
25.6

41.2

43.8
24.2 21.1

21.4 23.6
6.2 4.8

41.4
28.4

22.8 23.4 22.6

44.1
32.1 29.7 34.3

54.0 54.0
44.8

62.0 64.1

69.1

86.7
84.7

74.2

44.2 42.9
32.5

11.7

Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb.
(No. of cases)

250,000

Quasi-Emergency Measures
State of
Emergency

200,000

150,000

Go To
Go To Travel
TravelCampaign
Campaign
includingTokyo

0State of
Emergency

State of
Emergency

7th Wave

8th Wave
New Go To
TravelCampaign

6,000
New
Go To
Travel5,000Campaign
4,000

Number of New Cases of COVID-19 in Japan (left axis)

5th Wave

Number of Severe Cases in Japan (right axis)

100,000

50,000State of
Emergency

Quasi-Emergency
Measures

3rd Wave

1st Wave

6th Wave

4th Wave

3,000
2,000

2nd Wave

1,000

Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb.

Source: Ministry of Health, Labour and Welfare(*1) The RevPAR for each period is indexed with the same period in 2019 as 100.
(*2) Index for February 2023, first half 2023, second half 2023 and full year 2023 are estimate as of the date of this document.

802. Variance Trends of Occupancy, ADR, and RevPAR
 ADR-focused revenue management brought ADR in December 2022 above the same month in 2019

Variance trend in Major Indicators of The 25 Hotels with Variable Rent, etc. (vs same month in 2019)
20%

0%

ADR

-20%

-40%

Occupancy-60%＜December 2022＞-80%

RevPAR

ADR:

+3.9%

Occupancy: (5.2%)-100%

RevPAR:(1.6%)※ Variance ofMajor Indicators
vs 2019

Occupancy
RevPAR

2022

Full Year

Full Year

Full Year

Second HalfFirst Half

(15.5%)First Half

(28.8%)(23.7%)(30.9%)(56.6%)(60.3%)

Second Half

(28.9%)(65.5%)(65.3%)(30.1%)(76.2%)

9(44.2%)(34.7%)(15.0%)(38.9%)(60.4%)(54.4%)(25.3%)

Dec.

Nov.

Oct.

(12.1%)(24.7%)(67.7%)(64.2%)

Second Half
(18.8%)(54.7%)(53.1%)

Sep.

Aug.

Jul.

Jun.

May.

Apr.

Mar.

Feb.

Jan.

Dec.

Nov.

Oct.

Sep.

Aug.

Jul.

Jun.

2021

(19.9%)(66.5%)

May.

Apr.

Mar.

Feb.

Jan.

Dec.

Nov.

Oct.

Sep.

2020
First Half

ADR

Aug.

Jul.

Jun.

May.

Apr.

Mar.

Feb.

Jan.

-120%

3. Performance of The 25 Hotels with Variable Rent, etc.
Performance and Forecast of Major Indicators
Occupancy (right axis)

ADR (left axis)

Total of The 25 Hotels with Variable Rent, etc.
20,00015,01812,143

10,755 10,872 12,014
14,91816,334

15,196

11,625

11,140Total of The 25 Hotels with Variable Rent, etc.
(JPY MM)

17,20620,00013,61815,00021,697
16,39050%

8,874

10,000

4,552

3,169

5,000

13,255

100%

8,623

14,109

5,913

6,063

13,286

RevPAR (left axis)

Full Year
18,337

17,084

15,941

15,55515,00010,000

Second HalfFirst Half

(JPY)

Performance and Forecast of GOP

5,000

2,367

85.4% 29.5% 55.8% 75.4% 87.3% 48.7% 74.2% 82.9% 86.4% 39.2% 65.1% 79.1%
0

2019
Resultvs 2019
RevPAR vs previous
year

2021
Result2022
Result(76.2%) (54.4%)2023
Forecast

2019
Result

(9.6%)

2021
Result2022
Result(60.4%) (25.3%)(28.9%) +91.4% +98.1%

2023
Forecast

2019
Result+1.9%

2021
Result2022
Result(67.7%) (38.9%)+10.7% +88.4% +36.4%(7.1%)

2023
Forecast

0%(3.5%)

20,00010,000

Second Half
18,10019,015

17,192
14,038

12,615 12,292 13,554

15,000+89.4% +57.9%

17,211

12,625100%

vs 2019(89.1%) (59.1%) (24.5%)

2019
Resultvs 2019
RevPAR vs previous
year

2021
Result15,121

15,397

9,694

14,372

15,00050%

7,757

10,000

5,035

5,000

2022
Result(77.3%) (54.2%)

2023
Forecast

18,4792,014

85.9% 26.4% 54.6% 74.9% 88.4% 47.8% 73.4% 82.3% 87.2% 37.2% 64.1% 78.6%
02022
Result(JPY MM)
20,00015,751

3,333

5,000

19,581

18,071
13,537

6,709

6,716

Full Year

20,907

16,80914,676

2021
ResultThe 16 HMJ Hotels

First Half
17,084

2019
Resultvs previous+38.4% +274.9% +84.7%
year

The 16 HMJ Hotels
(JPY)

0

2023
Forecast(7.6%)(31.2%) +101.5% +101.8%

2019
Result2021
Result2022
Result2023
Forecast(60.1%) (24.9%)

+2.4%

2019
Result2021
Result2022
Result(68.0%) (38.5%)+10.7% +88.2% +36.3%(7.7%)

102023
Forecast(2.2%)+92.5% +58.8%

0%

0

2019
Result2021
Result2022
Result2023
Forecast

vs 2019(89.1%) (58.0%) (22.2%)

vs previous+46.7% +285.1% +85.3%
year4. Status and initiatives of HMJ Group Early implementation of a restructuring plans centered on cost reductions
 Promotion of strategic measures aimed at making a significant advance during the market recovery period, making the most of
the superiority of portfolio (centered on high price range, full-service and resorts)
2020
Lease
Contract

2021

2022

After 2023
"Fixed + Variable" rent scheme
equivalent to 2019

Changed to variable rent only (February 2020⁻December 2022)
Restructuring Centered On Cost Reductions
item

Costs

Developed
restructuring
plan whilechanging thelease contracts,
Agreed to
implement cost
reductionmeasures

Reducing
personal andoutsourcing costs

Measures to Reduce Cost•

Personal
Cost

Outsourcing
Cost

•
•
•
•
•
•

Streamlining, cutback and closure of
unprofitable department
Streamlining through integration of backoffice and common operations
Introduction of smart check in
Streamlining by promotion of multi-task
Reduce work force by measures above

Achieved
permanent
cost saving
targetReview specification of outsourced operation,
integration of standard, etc.
Insourcing outsourced operation

Rising energy costs, etc.

Create attractive
products to utilize
the hotel's featuresand superiority

Sales

Began efforts to quickly
restore sales against a
backdrop of improved
financial strengthExperience-based
ProgramProgram under″Co-creation with
Local Communities″

Strengthen Hotel
Superiority throughActive AssetManagement
Rebranding andRenovation
 Project ofIntroducing
Attractive Breakfast
 Setting up Amenitybase Welcome Services


11

Sales & Promotion
Strategy Focused on
Increasing Unit
Price

Two-sided sales atpoints of departureand arrivalStrengthen anddevelopapproaches to highunit price markets

Rising energy
cost andvarious cost

Rising costs

Superiority
of Portfolio

Value-added
creation bypromotingmeasures

Sales growth driven by ADR

Sales growth> Rising costs
driven by ADR

Aim to increase GOP

5. Examples of HMJ Group's Initiatives to Increase Sales
 Continuously developing measures to increase the attractiveness of the hotel by taking advantage of its superiority. Aiming to differentiate fromother hotels and increase sales by improving customer loyalty

Creation of attractive productProject of Introducing Attractive Breakfast• Provide attractive experience-based programs that connect with the local community basedon the "Strategy of Co-creation with Local Communities" to discover the charm of the area
▶ Hotel Nikko Alivila• In addition to the signature menus served in the kitchens with live feeling, etc., thehotel's own local menu is also available

Kayaking experience in the mangroves
Activities that will make guests feel like anadventurer in the rich nature of Okinawa

Reef Trail Experience
An activity where guests can actually walk along
the reef to see, touch, and learn about thecreatures that live in the clear blue ocean.

Signature
Menu▶ Kobe Meriken Park Oriental HotelTour of Sake Breweries in Nada area
Nada Gogo is known
throughout Japan as a
production center of Japanesesake. Guests can enjoy saketasting while understanding
the traditions of Japan fromexperience, which is popularamong inbound tourists.

"Meaty hamburger" with plenty of meatjuice, prepared in front of guests' eyes by
the chef"Kobe High Curry" is a reproduction of the
traditional taste that has long been loved
in the gastronomic city of Kobe

"Fresh Squeezed Orange Juice" made bysqueezing whole oranges on the spot

Stylish, cute, and colorfully decorated"Doughnut Wall"

Pork and egg rice balls,
Okinawan soul food(Oriental Hotel Okinawa Resort & Spa)

Takoyaki and kushikatsu,
Osaka's local delicacies(Oriental Hotel Universal City)▶ Oriental Hotel Fukuoka Hakata Station
Soba Making Experience
Guests canexperience theJapanese culture of
buckwheat noodle
making in a casual,
yet authentic way.

Amenity Base

Welcome Service• Established amenity base, which is exclusive
space where guest can select amenities to be
used inside guest rooms by itself• In addition to free services of drinks and local
sweets, cultural experience events are held
for inbound visitors to increase customer
satisfaction

Local menu
(Examples)
Sake tasting
Tasting of various brown sugars(Namba Oriental Hotel) (Oriental Hotel Okinawa Resort & Spa)

(Oriental Hotel Okinawa Resort & Spa)

Pottery experience (Left), Maccha experience (Right)(Oriental Hotel Fukuoka Hakata Station)

Average score of breakfast by
OTA(*2) Review Rating for
Oriental Hotel Universal City(*3)(*1) The plans listed on this page are the actual achievement to the date of this document and sale of these tour packages are subject be suspended or changed.
(*2) OTA, which stands for Online Travel Agent, is a travel agent that conduct transactions only via the internet.
(*3) Questionnaire evaluation by guests who have booked through Rakuten Travel and actually used the service.
Guests fill in a score of satisfaction on a 5-point scale.

12

Before initiatives
3.57 point(January 2021)

After initiative
4.38 point(February 2023)

6. Rebranding and Renovation
Rebranding

Renovation of Existing Hotels
Kobe Meriken Park Oriental Hotel• Three properties were rebranded to HMJ Group in 2021
Hotel Oriental Express Fukuoka Tenjin(former HOTEL ASCENT FUKUOKA)

Oriental Hotel Universal City

• Upgraded some existing rooms to executive rooms and set up an executive
lounge (completed in July 2021)

Rebrand opening: June 2021
The grade of the hotels has been
upgraded from economy to mid-price• Renovation of executive rooms (completed in July 2022)(Before renovation)

Grand opening: December 2021
All renovations completed in July 2022

(former Hotel Keihan Universal City)

Oriental Hotel Okinawa Resort & Spa(former Okinawa Marriott Resort & Spa)

Rebrand opening: October 2021
Completed renovation of lobby andpool in March 2022 and guest rooms
on two club floors in December 2022

ExecutiveRoom

ADR Variance of Rebranded Properties (vs same month in 2019)
70%
60%

24%

60%
Oriental Hotel
Universal City
43%
Hotel Oriental
Express Fukuoka
Tenjin8%

Oriental Hotel
8% Okinawa

49%

50%

32%

40%
30%

10%

1%

0%
-10%

(17%)

-20%
-30%

14%

13%

20%

(3%)

4%

11%

(8%)
(11%)

(12%)

AugustSeptember(After renovation)

ADR of executive rooms in 4Q 2022:+69.3% compared to the same period in 2019(*)

Sheraton Grand Hiroshima Hotel• Renovation of dining space and lobby lounge (completed in June 2022)(Before renovation)(After renovation)

Resort & Spa

Restaurant※ Club Floor Renovation Period(Late September 2022 toend of December 2022)

(19%)
July

OctoberNovember December

Unit price spent by customer at restaurant in 4Q 2022:+40.3% compared to the same period in 20192022(*) Difference of ADR of the 33 rooms converted to executive rooms for 4Q 2022 compared to ADR for the same rooms for the same period in 2019.

13

7. Internal Growth by Active Asset Management
 Potential upside by active asset management

Active Asset Management

Hotels1
Increase sales byimprovement ofhotelmanagement

Improvement ofHotel Sales

Reduction of
Operating Costs
of Hotels

2
Review of cost by
restructuring

Stimulate and acquire leisure demand through unique
attractiveness of each hotels and creation of highly
competitive products
Aim to improve hotel management through changes inhotel operator, rebranding, and upgrades, etc. in order toincrease hotel sales
Review the cost structure and improve the revenue
structure

Initiatives

Initiatives by
HMJ Group to improve sales

Restructuring by HMJ Group

Aim to maximize GOP through efficient management

Improve GOP

REIT

3
Improvement ofReal Estate
Operating
Revenue

Revision in rent
scheme, etc.

Reduction ofReal Estate
Operating Costs

Reduction of cost for property management, trust, management contract fee,and ground rent, etc.

Aim to increase the rent that JHR receives by raising therent burden ratio at the time of rebranding and othermeasures

Changed scheme byrebranding to HMJ Group
Introduction of variable rent at
the time of lease contract revision
Dormy Inn Kumamoto
Revised from April 2023
(3 years)(Before revision)
Fixed rent: JPY194MM per year

Improve NOI(After revision)
Fixed rent: JPY194MM per year+
Variable rent: 40% of annual GOP
exceeding JPY400MM

Maximize DPU
14

8. Acquisition of Property (January 2023)
 First property acquisition since the COVID-19 pandemic as the hotel market heads toward a full-fledged recovery
 JHR's first hotel located in the Kanazawa area

UAN kanazawa
Features• The hotel opened in December 2017, which is dedicated to lodging. The hotel
has superiority to capture inbound leisure demand, since the average room
size is large as it exceeds 30 sqm, and all rooms are double or twin rooms• The hotel is in a favorable location. It located within walking distance ofnumerous tourist attractions such as Kenrokuen Garden, 21st Century Museumof Contemporary Art, Kanazawa Castle, Higashi Chaya District, andOmi-cho Market• The hotel's rent structure can secure stability by fixed rent and can expect
upside through variable rent linked to its sales of accommodation

Changes in KPI(Results and forecast)Acquisition Date

Acquisition PriceAppraisal Value

January 31, 2023

JPY2,050MM

JPY2,140MM

OCC

Limited-service

Grade

Upper-middle

Location

Kanazawa city, Ishikawa

Acreage of Land
Total Floor Area
Space
Structure andStories100%

S with flat roof, Six stories
above ground

Completion

September 2017

No. of Guest
Rooms

47

Rent Structure

Fixed rent + Variable rent

Hotel Lessee

Solare Hotels and Resorts
Co., Ltd.

Rent

24,424 24,607
21,42322,358 22,010

20,00080%

17,25416,084

18,781

10,00020%

75.1% 53.5% 51.3% 70.6% 76.3%
0%0(Result)

15

2020(Result)

2021(Result)

2022

JPY108MM

VariableRent(*2)

JPY15MMJPY112MM

60%

40%

2019

Fixed Rent

NOI

11,967 11,293

729.91 sqm
2,606.85 sqm

RevPAR

30,000Property Overview
Hotel Type

ADR

2023 Forecasts(annualized)(*1)

2023(Result) (Forecast)NOI Yield

5.5%

NOI Yield after
Depreciation

4.4%(*1) Annualized figures for the property inthe revenue forecast for the fiscal year
ending December 31, 2023.
(*2) In case room sales exceeds baseamount (JPY270MM), the amountarrived by multiplying 30% to theexceeded amount.

9. Capital Expenditure (CAPEX) and Depreciation
 Appropriate CAPEX within depreciation
 CAPEX Ⅲ to be implemented in FY12/2023(JPY MM)

4,761

5,000

4,804

4,557

Depreciation
4,000

3,000

4,091

3,725

2,898
469
475

476

4,848

Renewal of guest room interiors(12th and 13th floors)

JPY212MM

Restaurant renovation(buffet-style restaurant
Santa Monica's Wind)

JPY110MM

1,172

Oriental Hotel Fukuoka
Hakata Station
Cost for large-scalerenovation works

393 3,147

Oriental Hotel tokyo bay

1,300
3,367
807
830

999
1,690

781

100
237
2,226
1,798

1,456

3,197
2,536

Total

2,868

JPY315MM
JPY63MMJPY472MM
JPY1,172MM※ The Definition of CAPEX
capital investment related to renewal ofbuildings, facilities, and equipment
CAPEX Ⅰ
which is required to maintain proper
values of properties

1,328

capital investment for fixtures, furnitureand equipment that are not directly
CAPEX Ⅱ
related to building structures or facilities
but necessary for operating hotels

0

Asset Size(*)(JPY MM)

Restaurant renovation(Buffet-style restaurant
Grand Cinq)

Renewal of guest room interiors(8th to 13th floors)

1,665

1,954

Renewal of guest room interiors(11th and 12th floors)

Oriental Hotel Okinawa Resort & Spa

2,000

1,000

Kobe Meriken Park Oriental Hotel

4,497

6,766
3,619

3,056

4,787

5,018

319,474309,370

374,508

370,031363,542

363,542

365,592

FY12/2017

FY12/2018

FY12/2019

FY12/2020

FY12/2021

FY12/2022

FY12/2023(forecast)strategic capital investment for renewalsof guest rooms, banquet rooms,
CAPEX Ⅲ restaurant and others in order tomaintain or to improve thecompetitiveness of the hotels(*) Asset size is based on the aggregate acquisition price of the properties at the end of each fiscal period. The same shall apply hereinafter.

16

10. ESG Initiatives
 JHR formulated policy on sustainability in December 2017. Aiming for medium to long term growth in harmony and coexistence withsociety and the environment, JHR implements initiatives to improve sustainability through appropriate responses to ESG issues

Timeline of Achievements

GRESB Real Estate Assessment(*4)
Acquired "Green Star" for five consecutive years from 20182017  Establishment of Sustainability Policy▶ In 2022, JHR was selected for"Sector Leader" in2018  Two properties̶Hotel Nikko Alivila and
Mercure Hotel
Okinawa Naha̶acquired
BELS(*1) certification
Hotel Nikko Alivila

Asian hotel sector

for three consecutive years
Mercure Okinawa Naha Received an "A" rating indicating excellent environmentallyfriendly management, in the SMBC Environmental
Assessment Loan(*2)

Establishment of GHG Reduction Targets

2019  Issued Hotel Green Bonds (nickname)and used the procured funds to carryout construction works to save energy
Oriental Hotel
Fukuoka Hakata Station

Okinawa Marriott
Resort & Spa

2020  Hilton Tokyo Odaiba acquired a CASBEE"B+ (good)" building certification

30% reduction of GHG emissions per floor area
(GHG emissions intensity)(*5) by 2050
(compared to FY2017(*6))

ESG Disclosure Information on JHR Website

Hilton Tokyo Odaiba

https://www.jhrth.co.jp/en/esg/index.html

2021  the Oriental Hotel Fukuoka Hakata Stationacquired CASBEE "B+ (good)" building
certification
 Identified JHR's seven materialities
related to ESG (key issues)▶ Acquired "4-star"in GRESB Rating※ ESG report to be published by the end of March 2023

Oriental Hotel
Fukuoka Hakata Station

 JHRA stated its expression of support for the TCFD(*3)
recommendations
2022  Released Initiatives for Four Disclosure themes recommended by TCFD
2023  Established GHG reduction targets

17(*1) BELS (Building-Housing Energy-Efficiency Labeling System) is a display system of energy conservation
performance of a building set by Ministry of Land, Infrastructure, Transport and Tourism.
(*2) "SMBC Environmental Assessment Loan" is a loan which SMBC set condition of loan based on assessment on
status of environmental considerations by the corporation based on environmental assessment standards
developed independently by SMBC and the Japan Research Institute, Limited.
(*3) TCFD is an abbreviation for Task Force on Climate-related Financial Disclosures.
(*4) The GRESB is an annual benchmarking program to evaluate ESG considerations of property companies and realestate funds. The GRESB Real Estate Assessment is distinguished by its comprehensive evaluation of initiatives forsustainability of property companies, REITs and real estate funds, not of individual properties. GRESB rating is arelative evaluation based on comprehensive scores and the highest being "5-star."(*5) Properties owned by JHR are managed by hotel lessees, etc. GHG emissions of JHR fall under Scope 3, Category
13, Leased Assets (Downstream).
(*6) The GHG emissions (GHG emissions intensity) for FY2017 (Baseline fiscal year, April 2017–March 2018) is 0.135(t-CO2/m2).

Ⅳ. Financial Conditions

1. Financial Conditions (1)Main Financial Indicators

Repayment Schedule of Interest-bearing Debt

(as of the end of December 2022)

LTV (total asset base)

41.4%

Cost for interest-bearing debt(*1)

1.0%(as of the end of December 2022)(JPY MM)Free cash(*3)

JPY

Unrealized gain(*4)

JPY

28,00030,00021,53621,80020,000

3,000

2,800

17,35010,00018,53619,00013,10050,545

20.9Bn125.0Bn

2.0%
4.8

Costs for Interest-bearing Debt

2023

1.5%

3.5

1.0%

1.0%

1.0%

1.0%

0.5%
0.0%

Repayment Date
Full Year

4.0
2.8

1.0%
1.1%

(year)

5.0

4.3

First Half

3.0
2.0

Second Half

1.0
End of

End of

End of

End of

End of

FY12/2018

FY12/2019

FY12/2020

FY12/2021

FY12/2022(19th Period)(20th Period)(21st Period)(22nd Period)(23rd Period)

17,00010,00018,000

2024

2025

2026

8,000
8,000

2027

2028

2029

Refinancing Result in 2022
6.0

5.2

17,0004,250

0Changes in Costs for Interest-bearing Debt(*1) and
Average Life of Interest-bearing Debt(*2)
Average Life of Debt

Investment Corporation Bonds

40,0002.8 years

Average life of interest-bearing debt(*2)

Loans

50,54550,000

0.0

Balance
JPY38,336MM(Including Investment Corporation Bonds: JPY2,800MM)JPY15,234MM
JPY23,102MM(Including Investment Corporation Bonds: JPY2,800MM)(*1) Weighted-average costs for interest-bearing debt (including up-front fee, etc.) as of the end of each year. Rounded
off to one decimal place.
(*2) Average life of interest-bearing debt as of the end of each year.
(*3) Represent the balance of cash and deposits, excluding various reserves in trust, etc.
(*4) Unrealized gains are calculated by subtracting book value from appraisal value. The same shall apply hereinafter.

19

1. Financial Conditions (2)Lender List for Interest-bearing Debt

Breakdown of Interest-bearing Debt
(Unit: JPY MM)

Lenders/Bond Name

Balance(as of the end of
December 2021)
Balance%

Balance(as of the end of
December 2022)
Balance%

Variance

32,323

19.6%

33,23820.2%

915

Mizuho Bank, Ltd.

19,33011.7%

19,818

12.1%

488

SBI Shinsei Bank, Ltd.

18,558

11.3%

18,558

11.3%–

Sumitomo Mitsui Trust Bank, Limited

13,795

8.4%

14,143

8.6%

348

Resona Bank, Limited

9,882

6.0%

9,982

6.1%

100

Development Bank of Japan Inc.

5,885

3.6%

6,034

3.7%

149

Fukuoka Bank, Ltd.

4,636

2.8%

4,636

2.8%

–

The Nomura Trust and Banking Co., Ltd.

4,548

2.8%

4,548

2.8%

–

Aozora Bank, Ltd.

3,352

2.0%

3,352

2.0%

–

The Chiba Bank, Ltd.

2,732

1.7%

2,732

1.7%

–

MUFG Bank, Ltd.

3,123

1.9%

2,700

1.6%

(423)

The Nishi-Nippon City Bank, Ltd.

2,684

1.6%

2,684

1.6%

–

Hiroshima Bank, Ltd.

1,854

1.1%

1,854

1.1%

–

Sompo Japan Insurance Inc.

1,464

0.9%

1,464

0.9%

–

The Minato Bank, Ltd.

–

–

1,000

0.6%

1,000

The Shizuoka Bank, Ltd.

488

0.3%

588

0.4%

100

75.7% 127,331

77.5%

2,677

Investment Corporation Bonds

8th Investment Corporation Bonds without Collateral

1,100

1.8%

3,000

1.8%

–

0.7%

1,100

0.7%

–

9th Investment Corporation Bonds without Collateral

1,000

0.6%

1,000

0.6%

–

12th Investment Corporation Bonds without Collateral

2,000

1.2%

2,000

1.2%

–

13th Investment Corporation Bonds without Collateral
Total of Investment Corporation Bonds(for institutional investors)
Investment Corporation Bonds(for individual investors)
5th Investment Corporation Bonds without Collateral

–

–

2,800

1.7%

2,800

7,100

4.3%

9,900

6.0%

2,800

23.2%

9.4%
69.2%

77.5%

Loans
Investment
Corporation Bonds

76.8%

Short-termLong-term(scheduled repayment
within one year)

Long-term

Fixed Interest Rate
Variable Interest Rate(*) Long-term represents debts with original maturity over one year, and short-term represents debts
with original maturity within one year.

Changes in LTV
LTV (total asset base)
50%

39.0%

40.6%

31.2%

32.1%

Appraised LTV

42.2%

41.8%

41.4%

34.2%

33.9%

34.0%

40%
30%
20%

End of

End of

End of

End of

End of

FY12/2018

FY12/2019

FY12/2020

FY12/2021

FY12/2022(19th Period)(20th Period)(21st Period)(22nd Period)(23rd Period)

Status of Credit Rating
6,000

3.6%

–

–

7th Investment Corporation Bonds without Collateral

9,000

5.5%

9,000

5.5%

–

10th Investment Corporation Bonds without Collateral

10,000

6.1%

10,000

6.1%–

11th Investment Corporation Bonds without Collateral
8,000
Total of Investment Corporation Bonds
33,000(for individual investors)
Total of Investment Corporation Bonds
40,100

4.9%

8,000

4.9%

–

20.0%

27,00016.4%(6,000)24.3%

36,90022.5%(3,200)164,754 100.0% 164,231 100.0%(523)

Total of Interest-bearing Debt

21.4%

22.5%

Sumitomo Mitsui Banking Corporation

Total of Bank Loans
124,654
Investment Corporation Bonds(for institutional investors)
6th Investment Corporation Bonds without Collateral
3,000(as of the end of December 2022)(6,000)20

Japan Credit Rating Agency, Ltd.
(JCR)

A+ (negative)

Rating and Investment Information, Inc.
(R&I)

A

(negative)

1. Financial Conditions (3)Changes in Appraisal Value

Changes in Appraisal Value (Unrealized Gains)(JPY Bn)

Book Value

500

398.7
400

302.1

113.8

Unrealized Gains
439.3
122.1

437.5

525.9
151.5

493.3
126.5

485.4
127.1

(Based on 41 hotels owned by JHR at the end of FY12/2022)

Appraisal(*1)

483.1

No. of Acquisition
Price
Property(*2)(JPY MM)

125.0

(*3)

130.7
End ofDecember2022
End ofDecember
2021
End ofDecember2020
End ofDecember
2019

300

78.7
200

223.3

100

284.9

317.2

306.7

374.3

366.7

358.3

358.0

0

Ratio of
Unrealized
Gains
No. ofProperties

Variance
Appraisal Variance of
Variance of Net Cash
Rateof NetValue
Flow
Appraisal CAP
Cap
Rate
(*3)
(*3)
(JPY MM)
Value(JPY MM) Cash Flow

35.2%

39.9%

38.5%

42.6%

40.5%

34.5%

35.5%

34.9%

36

41

44

41

43

42

41

41

41

363,542

483,110(0.5%)

4.5%(0.0pt)21,897(1.2%)

41

363,542

485,480

+0.4%

4.6%

(0.0pt)22,158+0.0%

41362,465

483,430(4.6%)

4.6%+0.0pt22,151(2.3%)

41

362,465

506,760

–

4.5%

–

22,682–(*1) Based on the appraisal report at each period.
(*2) Numbers in this table are for 41 properties after exclusion of Sotetsu Fresa Inn Shimbashi-Karasumoriguchi and ibis
Tokyo Shinjuku.
(*3) Cap rate, variance of cap rate and net cash flow are rounded off to one decimal place.

FY12/2015 FY12/2016 FY12/2017 FY12/2018 FY12/2019 FY12/2020 FY12/2021 FY12/2022(16th Period) (17th Period) (18th Period) (19th Period) (20th Period) (21st Period) (22nd Period) (23rd Period)

Negative Goodwill<Policy for Use of Negative Goodwill>＜Amount used in FY12/2022＞

1. Add JPY262 million (50-year amortization amount ofnegative goodwill) to dividends every fiscal year
2. In addition to above, dividends will be increased in
response to the following
•
•
•
•
•

Cope with loss on sales caused by property dispositions
Cope with loss on retirement of noncurrent assets
Cope with dilution of dividend per unit
Cope with inconsistency between tax and accounting treatments(Amortization of fixed-term leasehold of land, amortization ofasset retirement obligations, etc.)
Cope with suspension of sales and such due to large-scalerenovation works with significant impact on revenues

50-year amortization amount on negative goodwill :JPY262MM

Cope with loss on retirement of noncurrent assets :JPY57MM

Amortization of trademark rights:

JPY56MM

Total amount:

JPY376MM

Balance of Negative Goodwill
after the end of December 2022

21

JPY9,600MM

Ⅴ. Market Environment

1. Status of Domestic Accommodation Demand Prior to the COVID-19 pandemic, domestic accommodation demand was generally at 80% of the total demand Domestic accommodation demand remains above 2019 levels from October 2022 onward

Changes in Number of Overnight Guests in Japan (by calendar year)(Guest nights in millions)

492

510

69

80

94

423

430

444

480

2016

2017

2018

2019

85.9%

84.4%

82.5%

80.6%

500
400

No. of Inbound Overnight Guests
No. of Japanese Overnight Guests

596

538

600

116

300
200
100

332
20

318
4

311

313

2020

2021

454
17

437

0

* Ratio of Japanese overnight guests

2022

Trend of Number of Japanese Overnight Guests in Domestic Accommodation Facilities (by month)(Guest nights in millions)60

No. of Japanese Overnight Guests

108%
103%

102%

50

87%

20
10
0

90%

59%

57%

36 35

43%

25

27%
21%

11

9

23
16

53%

28 28

90%
78%

70%

40
30

vs 201965%

34

51% 51%

37
29

27
17 18

72%
56%

49%

32

29 31
22 20
20

80%

84%

47

67%
57% 55%

54%

84%

80%

108% 120%
106%
104%
95%
93% 95%
100%
87%
87%

22

37

39
28

33 33

36

39
34

39

42 42 41

2021

60%
40%

23

20%

Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.
2020

80%

2022

0%

Source: Statistics of Overnight Travel by Japan Tourism Agency(*) Rounded off to the nearest millions of overnight guests. Numbers for January to November 2022 are second preliminary figure, numbers for December 2022 are first preliminary figure. The annual revised report,
which reflects newly opened hotels in 2022, etc. is scheduled to be released on June 30, 2023.

23

2. Status of Inbound Visitors
 The number of inbound visitors increased remarkably since the significant easing of entry restriction in October 2022. In December 2022, recovered to54.2% of the same month in 2019
 For composition of inbound visitors since the easing of entry restriction, South Korea took major portion, followed by those from US and Southeast Asia

Changes in Number of Inbound Visitors(Thousands people)

Number of International Visitors to Japan

3,000

vs 2019

120%

2,500

100%

2,000

80%

54.2%

1,500

38.3%

1,000

40%

2018

2019

(Thousands people)

2018

2019

(Composition
Ratio)

2022

8,380

27%

9,594

30%

189

5%

South Korea

7,539

24%

5,585

18%

1,013

26%

Taiwan

4,757

15%

4,891

15%

331

9%

7%

2,291

7%

269

7%

4%

1,319

4%

198

5%

Singapore

437

1%

492

2%

132

3%

Vietnam

389

1%

495

2%

284

7%

UK

334

1%

424

1%

58

2%

UK 1%

U.S.

Vietnam 3%

1,724

5%

324

8%

2%

622

2%

89

2%

Others

3,937

13%

4,445

14%

946

25%

31,192100%

31,882

100%

3,832

100%

Dec.

Oct.

Nov.

Sep.

Jul.

May

Jun.

Apr.

Mar.

Jan.

Feb.

Dec.

Oct.

Nov.

Sep.

Jul.

80%

19%

Australia

1,132

5%

2022

100%

2,208

552

0%

OthersThailand

1,526

20%

Level of International Passenger
Flight Arrivals and Departures at
Narita Airport(vs same month in 2019)

China 3%

Hong Kong

Australia

Aug.

May

Jun.

Apr.

Mar.

Jan.

Feb.

Dec.

Oct.

2021

Composition from
October to December 2022

(Composition
Ratio)

China

Total

Nov.

Sep.

Jul.

Aug.

May

Jun.

2020

Number of Inbound Visitors to Japan and Composition Per Year
(Composition
Ratio)

Apr.

Mar.

Jan.

Feb.

Dec.

Oct.

Nov.

Sep.

Jul.

Aug.

May

Jun.

Apr.

Mar.

Jan.

Feb.

Dec.

Oct.

Nov.

Sep.

Jul.

Aug.

May

Jun.

Apr.

Mar.

Jan.

Feb.

0

Aug.

20.0%

500

60%

South Korea

3%

32%

U.S. 9%60%
40%

37% 39% 40%

54%

20%
TaiwanHong Kong 11%

Singapore 4%
Thailand
6%

9%

0%
Jul.

Aug.

Sep. Oct.
2022

Nov.

Dec.

Source: NARITA INTERNATIONAL AIRPORTCORPORATION "Monthly Traffic Statistics"

Source: Number of International Visitors to Japan by Japan National Tourism Organization (JNTO)(*) Rounded off to the nearest thousands of people. The figures for January to November 2022 are provisional numbers, and the figure for December 2022 and the annual figures for 2022 are estimated numbers.

24

47% 49%

3. Status of New Supply of Hotels
 New supply for 2022 were reduced by around 3,000 rooms compared to the forecast a year ago

Supply of Rooms in Hotels/Ryokans in Japan
As of the end of January 2023
(No. of rooms)
80,00020,000

Supply Forecast

32,98816,51740,00021,65520,0000

Supply Forecast＜Japan＞
54,051 59,079 49,115

60,00044,84329,874 27,153

Actual(No. of rooms)
80,000＜Japan＞
54,051 59,079 49,115

60,00040,000

ActualReference: as of the end of January 2022(*2)

32,98835,977

29,681 30,293

16,517

12,9100

Ratio of New Supply

+1.1%

+2.1%

+3.4%

+3.6%

+2.9%

+1.7%

+1.5%

+1.2%

+2.4%

Ratio of New Supply

+1.1%

+2.1%

+3.4%

+3.6%

+2.9%

+1.7%

+1.7%

+0.7%

+2.0%

Excl. Tokyo, Osaka

+0.7%

+1.7%

+2.5%

+2.7%

+2.1%

+1.6%

+1.3%

+0.8%

+2.0%

Excl. Tokyo, Osaka

+0.7%

+1.7%

+2.5%

+2.7%

+2.1%

+1.6%

+1.3%

+0.6%

+1.5%

2024-

(%: change from theprevious year)

2016

2017

2018

2019

2020

2021

2022

2023

2024-

(%: change from theprevious year)

2016

2017

2018

2019

2021

2022

＜Tokyo＞(No. of rooms)
20,0002023(including
undetermined plan)

6,107

5,866

5,430

4,189

4,980

10,000

5,866

3,137

5,537

5,330
2,223

0

新規供給割合

+4.1%

+3.8%

+7.4%

+6.5%

+6.8%

+1.6%

+2.7%

+2.1%

+2.4%

Ratio of New Supply(%: change from theprevious year)

2016

2017

2018

2019

2020

2021

2022

2023

2024-

(%: change from theprevious year)＜Osaka＞(No. of rooms)
12,000

8,329

9,000

(including
undetermined plan)

10,721

3,369

1,402

+4.1%

+3.8%

+7.4%

+6.5%

+6.8%

+1.6%

+2.7%

+1.1%

+2.7%

2016

2017

2018

2019

2020

2021

2022

2023

2024-

＜Osaka＞(No. of rooms)
12,000

9,373
6,205

5,018

6,000
3,000

6,107

5,000

0

(including
undetermined plan)

11,833 11,105 12,483

15,000

3,137

5,000

＜Tokyo＞(No. of rooms)
20,00011,833 11,105 12,483

15,00010,000

2020

8,329

9,000

4,851
2,254

3,000

0

10,721

8,445
6,205

5,018

6,000

(including
undetermined plan)

3,369

1,402

5,213
1,805

0

新規供給割合

+1.8%

+6.3%

+9.9%

+11.6%

+6.0%

+3.1%

+2.0%

+4.2%

+7.8%

Ratio of New Supply

+1.8%

+6.3%

+9.9%

+11.6%

+6.0%

+3.1%

+4.6%

+1.5%

+7.0%

(%: change from theprevious year)

2016

2017

2018

2019

2020

2021

2022

2023

2024-

(%: change from theprevious year)

2016

2017

2018

2019

2020

2021

2022

2023

2024-

(including
undetermined plan)(including
undetermined plan)

Source: Estimated by the Asset Management Company using data from "Public Health Administration Report" by Ministry of Health, Labour and Welfare (MHLW), a weekly hotel & restaurant magazine (HOTERES), and Nikkei Telecom.
(*1) Ratio of new supply is the ratio of new rooms to be supplied in a year to the stock of rooms (Hotels/Ryokans) at the beginning of the year. With regard to the above data, please note that in case the number of rooms are stated as "to be
determined" by hotels, the asset management company has used 180, the average number of new supply of hotel rooms, for calculation.
(*2) The figures were announced in the Financial Results Briefing for the fiscal year ended December 2021.

25

Appendix 1
JHR's Characteristics and Strategy

1. JHR's Investment Targets
Strong ability in acquiring properties

Aim to increase dividend
for mid to long term Highly recognized as Japan's largest J-REIT specializing
in hotels
 High presence and credibility in the property market bycontinuously acquiring properties Capability to propose various acquisition schemes and to
execute acquisitions

High capability in achieving internal growthHighcapability inachievinginternal
growthStrongability inacquiringproperties

 Management approach through active asset management
strategies that achieves a good balance between stability
and upside potential
 Increase hotel revenue through collaboration with highquality operators
 Attract inbound demand through enhanced international
brand portfolio
 Strengthen and maintain competitiveness by investing inappropriate capital expenditures

Stablefinancingcapability

Stable financing capability
 Secure sound and stable finance Diversify financing methods27

2. Simultaneous Pursuit of Stability and Upside Potential
 JHR pursues both stability and upside potential by steadily implementing growth strategies

Ensure Stable Revenue

Pursue UpsideManagement
contract structure

Fixed rent structure

Revenue sharing
structure

Active Asset Management Strategies

 Appropriate monitoring of hotel operation
 Capital expenditures to maintain competitiveness and asset value

 Change in rent structures and rebranding Strategic capital expenditures, etc.

Increase in rental income, etc. throughimprovement in hotels' performance

Maintain and improve rent-paying capacity of tenants, etc.

Proportion of Rental Income
2019 Results(annualized)

Variable rent
structure

Proportion of Rent Structures(*4)(as of February 22, 2023)

2023 Forecast(*1)
Fixed rent only

(*1)
(*2)
(*3)
(*4)

Variable rent, etc.(*2)

Variable rent, etc.(*2)

38.4%

29.8%

9 properties

Fixed rent, etc.

Fixed rent, etc.

Variable rent, etc.(*3)

61.6%

70.2%

33 properties

Based on the forecast announced in the financial report dated February 22, 2023.
Variable rent, Rent from revenue sharing and Income from management contracts.
Fixed rent + variable rent structure, Fixed rent + revenue sharing structure, Variable rent structure and management contract structure.
Dormy Inn Kumamoto is classified based on a lease contract that will be renewed on April 1, 2023.

28

3. External Growth Strategy
Recognition of External
Environment
Trend of the Hotel
Investment Market
 Although COVID-19 has not been
converged yet, a remarkable recovery indomestic demand has been seen due tosupport by eased restrictions on activities
and New Go To Travel Campaign. The
inbound tourism is also on recovering
trend with the significant easing of
immigration restrictions. The revenue of
hotels are expected to improve
continuously under these circumstances.


As for the hotel transaction market,
investors mainly, foreign funds, etc., areactively considering hotel investment
with expectations of a hotel market
recovery and an easing attitude toprovide finance for hotel asset byfinancial institutions. Such conditions maylead to a gradual increase in hoteltransactions.

 For medium to long term, there ispossibility that hotel investment market
to be revitalized again due to an
expected full-fledged recovery andfurther growth of inbound demand in
addition to solid domestic demand. For
acquisition of hotels, it is important
to differentiate each hotel since thecompetitiveness of hotels is becoming
more evident in accordance with the
hotel specifications, locations, and theabilities of hotel operators.

Basic Policies
 Acquire highly competitive hotel real estate, etc. in areas that have potential to attract "demand by both
domestic and inbound leisure customers" in the medium to long-term
 Improve profitability, stability, and quality of the overall portfolio

Key Measures
 Emphasize the superiority of buildings and facilities (infrastructure), operations (services), and locations ofhotel real estate, etc.
• The prime investment targets are "full-service hotels" and "resort hotels" that have high barriers to entry
due to operation and management know-how, capital outlay and locations• In the case of "limited-service hotels," the creditworthiness of the hotel lessee, the age of the building,location, guest room composition and profitability are important• For limited-service hotels specialized in selling single rooms, consider acquisition individually, and take thehotel specifications and the possibility of achieving the upside into account• Especially, proactively review the purchase of hotels that have potential for internal growth byimplementing active asset management strategy or hotels that synergy effect are expected with theexisting properties Strategic investment areas• Hokkaido area, Tokyo and bay area(*1), Osaka/Kyoto area(*2), Fukuoka area, and Okinawa area
 Investigation and planning of the internal growth strategy upon property acquisition• Investigate the appropriate rent level and rent structure upon renewal, etc., cost reduction possibilities,
and possibilities to improve buildings and facilities• Particularly, if the hotel pays variable rent, etc., promote internal growth through collaboration withlessees and/or operators
 Use HMJ's efficient hotel operation platform and know-hows to improve operation, etc. to respond to newinvestment opportunities which never seen before (such as sales of hotels with intention to off-balance
asset or sales without operators, etc.), because these were caused by the impact of COVID-19(*1) Bay Area includes the coastal area of Tokyo Bay in Kanagawa and Chiba prefectures. The same shall apply hereinafter.
(*2) Osaka/Kyoto Area refers to Osaka and Kyoto prefectures. The same shall apply hereinafter.

29

4. Internal Growth Strategy
Recognition of External
Environment
Hotel Market Environment

Basic Policies
 Pursue both stability and upside potential by steadily implementing active asset management strategies

 The domestic leisure demand isrecovering significantly, and the New
Go To Travel Campaign promotes thecurrent growth further. The hotel
performance is expected to growcontinuously with a full-fledged recoveryof the inbound tourism in addition to solid
domestic travel demand.
 Although there are supply-demand
imbalances in some regions depending on
the market due to the continued supplyof new hotels against the backdrop ofrobust hotel demand during the prepandemic period, we believe there are nochanges to the medium to long term
trend of expansion in the tourism market
accompanying economic growth, etc. in
the Asia region in the post-COVID-19
society.
While the market is entering a fullfledged recovery phase, upward pressure
on costs and expenses has been occurred.
It is important to increase unit prices byappropriately passing on higher costs andproviding added value.

Key Measures Planning and execution of the active asset management in order to realize pursuit in upside revenue• Make strategic CAPEX which will improve profitability and strengthen competitiveness mainly at hotels
with high growth potential• Raise rent and change to rent structures that can achieve upside revenue• Reduction of management contract fee of properties under management contract• Increase hotel revenue through collaboration with high-quality operators• Attract inbound demand through rebranding to international brands• Make proactive proposals to build effective hotel operating structures which aim to maximize GOP, fromthe perspective of both hotel sales and expenses• Stimulate and capture domestic demand by creating products utilizing the characteristics of each hotel inline with the current market environment Planning and execution of strategic CAPEX which secure steady revenue, and monitoring of lessees• Analyze the creditworthiness of hotel lessees, understand income and expenditures of hotels, closely
observe and improve rent-paying capacity• Maintain and improve rent-paying capacity of tenants, etc. through capital expenditures, which lead tomaintain and improve competitiveness and asset value30

5. Financial Strategy
Recognition of External
Environment
Trend of Financing Environment
and Interest Rates
 Compared to 2021, the number and total
amount of public offerings by J-REIT
decreased in 2022. As for the TSE REIT
Index, although there were certain pushbacks due to buying on dips when the
NAV multiple was below 1x, it weakened
and fell 8.3% due to monetary tightening
associated with inflation in foreigncountries and Russian invasion of Ukraine,etc.
 As the economic impact of COVID-19 has
been reduced and hotel performancecontinues its trend to recover, financial
institutions have taken a more positive
stance.
 Although both short-term and long-term
interest rates remain at low levels due tothe monetary easing policy, certain
caution is required for changes in longterm interest rates due to policy changes
by the Bank of Japan and overseas
factors.

Basic Policies
 Ensure healthy and stable finance Strengthen lender formation and relationships with financial institutions
 Diversify financing methods

Key Measures
 Maintain good relationship with financial institutions
 Strengthen lender formation by inviting new banks, etc.
 Maintain LTV level at a maximum of 50% (total asset base) for the time being Extend borrowing periods and optimize funding costs to improve financial stability
 Diversify financing methods such as public offerings and issuance of investment corporation bonds

31

6. Benefits Program for Unitholders
JHR implemented benefits program for unitholders to obtain a better understanding on hotels undermanagement, improve their satisfaction and expand the investor baseEligible recipients of complimentary couponsComplimentary coupons will be sent to those who hold ten or more JHR units
at the end of June every year (end of the midterm settlement)<FY2022>
Eligible unitholders: 12,286
Valid period: One year between January 1, 2023 to December 31, 2023

Details of the benefits program
Five complimentary coupons for accommodations and fivecomplimentary coupons for restaurants(*)
10% discount from the best rate for accommodation by each
hotel and 10% discount for restaurants(*) Complimentary coupons for restaurants are only available at selected hotels.

Hotels that offer the Benefits Program (21 Hotels)
The 16 HMJ Hotels

Kobe Meriken Park
Oriental Hotel

ACTIVE-INTER CITYHIROSHIMA (Sheraton
Grand Hiroshima Hotel)

Hotel Nikko Nara

Oriental Hoteltokyo bay

Oriental Hotel Fukuoka
Hakata Station

Hilton Tokyo Odaiba

Namba
Oriental Hotel

Holiday Inn
Osaka Namba

Oriental Hotel
Hiroshima

The Accor Group Hotels

Hotel Nikko Alivila

Hilton Tokyo Narita Airport

Hotel Oriental Express
Osaka Shinsaibashi

Oriental Hotel
Universal City

32

Oriental Hotel Okinawa
Resort & Spa

International Garden Hotel Narita

Hotel Oriental Express
Fukuoka Tenjin

Mercure Sapporo

ibis Styles Sapporo

Mercure Okinawa Naha

ibis Styles Kyoto Station

Mercure Yokosuka

Appendix 2
Information of Properties

1. Portfolio Portfolio consisted of competitive hotels in areas with strong leisure lodging demand Selectively invest in locations with high growth potential of leisure demand such as Strategic Investment Areas

Portfolio Summary

Strategic Investment Areas and Locations of Properties(as of February 22, 2023)
Property Acquired in 2023

Total Assets
JPY365.5Bn

Existing properties
Strategic Investment Areas

Hokkaido Area
No. of Hotels

Okinawa Area

42 Hotels(32 in Strategic Investment Areas)

No. of Guest Rooms

11,326 Rooms

Tokyo & Bay Area

Fukuoka
Area
Osaka/Kyoto Area

Tokyo 23 wards

34

2. Portfolio Diversification
 Widely diversified and high-quality portfolio Appeal to inbound visitors by international brands(as of February 22, 2023)

By Area
Hokkaido
Chubu
3%
Chugoku 5%

OthersDormy Inn, etc.
(Kyoritsu Maintenance)

Tokyo

6%

KyushuBy Hotel Brand
10%

Oriental Hotal

4%

25%

(HMJ)

the b 3%(excluding Okinawa)24%

ibis/Mercure

6%(Accor)7%

Okinawa

Hotel Nikko

12%

8%

KansaiKanto(excluding Osaka)(excluding Tokyo)

8%

21%

Osaka

International
Brand:
51%

Holiday Inn
HiltonSheraton

32%

14%

By Hotel Grade5%

By Hotel Type

Econoby 3%

Mid-price
41%

LuxuryResort21%

21%

Limitedservice
31%

Uppermiddle

Full-service

34%

48%

(*) Calculated based on acquisition price.

35

(IHG)
7%

3. Trend of Asset Size
 Improvement of the quality of JHR's portfolio and successive external growth through strategic asset replacement

Growth in Asset Size, etc. (JPY MM)+21.1%+11.4%(1.2%)(1.8%)

0.0%

+0.6%

(3.2%)+27.1%+30.2%+9.1%

374,508+7.0%

319,474

286,801

370,031363,542

363,542

365,592

309,370

225,723
122,285

173,429

158,902130,883

as ofApril 2012 FY12/2012 FY12/2013 FY12/2014 FY12/2015 FY12/2016 FY12/2017 FY12/2018 FY12/2019 FY12/2020 FY12/2021 FY12/2022 February 22,(merger)(13th Period) (14th Period) (15th Period) (16th Period) (17th Period) (18th Period) (19th Period) (20th Period) (21st Period) (22nd Period) (23rd Period)2023

No. ofProperties

28

28

28

30

36

41

44

41

43

42

No. ofAcquisition

－

2

2

3

9

5

3

－

2

－

AcquisitionPrice－ JPY10.8Bn JPY32.6Bn JPY15.7Bn JPY57.0Bn JPY61.0Bn JPY32.6Bn－ JPY65.1Bn－

No. of
Dispositions

－

2

2

1

3

－

－

3

－

1

Sale Price－

JPY0.8Bn

JPY2.6Bn

JPY0.7Bn

JPY4.8Bn－－ JPY12.1Bn－

Unrealized
Gains(*1)－

JPY2.2Bn

JPY9.8Bn JPY34.8Bn JPY78.7Bn JPY113.8Bn JPY122.1Bn JPY130.7Bn JPY151.5Bn JPY126.5Bn JPY127.1Bn JPY125.0Bn JPY125.1Bn

41

41

42

－

1

JPY0.8Bn－

JPY2.0Bn

1－－

JPY8.0Bn JPY11.3Bn

－

－

(*2)

－

(*2)

Aim for Successive Growth+21.4%(*3)(*1) Unrealized gains are calculated by subtracting book value from appraisal value.
(*2) JRH acquired land that is part of the Oriental Hotel Universal City site for JPY754MM on July 30, 2021.
(*3) Calculated by adding the unrealized gains of UAN kanazawa, acquired in January 2023, to the unrealized gains as of the end of December 2022. As for UAN kanazawa, the unrealized gain is obtained by deducting
the acquisition price from the appraisal value at the time of acquisition.

36

4. Rent Structures
Stability

Upside(FY12/2023 forecast)Rent Structure(*1)

Fixed rent

Fixed rent +Revenue sharing

Fixed rent + Variable rent

Variable rentManagement contract

Type of Contract

Lease contract

Lease contract

Lease contract

Lease contract

Management contract

Fixed

○

○

○

–

–

–

Variable–

A certain percentage of sales
exceeding the threshold

A certain percentage of
hotel GOP

A certain percentage of hotelrevenue or hotel GOP

Hotel GOP–

JPY2,151MM(9.9%)

JPY2,550MM(11.7%)

JPY14,154MM(64.9%)

JPY1,429MM(6.6%)

JPY1,517MM(7.0%)

JPY21,803MM(100.0%)

Fixed Rent,
etc.(*3) (%)

JPY2,151MM(9.9%)

JPY2,485MM(11.4%)

JPY9,912MM(45.5%)

JPY496MM(2.3%)

JPY252MM(1.2%)

JPY15,298MM(70.2%)

Variable Rent(%)–

JPY65MM(0.3%)

JPY4,242MM(19.5%)

JPY933MM(4.3%)

JPY1,264MM(5.8%)

JPY6,504MM(29.8%)

Involvement inHotel Operation

Low

Low

High

High

High

–

CAPEX Paid by
JHR(*4)

1) Renewal of building andfacilities

1) Renewal of building
and facilities<3) Strategic investment>

1) Renewal of building andfacilities
2) Fixtures and equipment
3) Strategic investment

1) Renewal of building andfacilities
2) Fixtures and equipment
3) Strategic investment

1) Renewal of building andfacilities
2) Fixtures and equipment
3) Strategic investment–

No. of Properties

9

4

21

4

4

42

Acquisition Price(%)

JPY30,041MM(8.2%)JPY33,954MM(9.3%)

JPY259,964MM(71.1%)

JPY19,235MM(5.3%)

JPY22,397MM(6.1%)

JPY365,592MM(100.0%)

The Beach Tower Okinawa

Hilton Tokyo Bay

The 14 HMJ Hotels

Hilton Nagoya

ibis Styles Kyoto Station

Hotel Francs

Smile Hotel
Nihombashi Mitsukoshimae

The Two HMJ Rebranded
Hotels

Mercure Yokosuka

ibis Styles Sapporo

Comfort Hotel Tokyo
Higashi Nihombashi

The Ishin Group Hotels

Chisun Hotel Kamata

Mercure Sapporo

Chisun Inn Kamata

Mercure Okinawa Naha

Type of
Rent

Real Estate Operating
Revenue(*2)(%)(breakdown)(forecast for FY12/2022)

HotelsCANDEO HOTELS
UENO-KOEN
and other hotels

UAN kanazawa

Dormy Inn Kumamoto(*5)(*1) Rent structure is categorized according to the rent contract for hotels of each asset owned by JHR.
(*2) Based on the revenue forecast for FY12/2023, which was announced on February 22, 2023. Revenue arise from trademark rights are excluded.
(*3) Fixed rent includes fixed rent and utility income based on rent contract of non-hotel portion (offices, signage, car parks, retail shops, etc.) of asset owned by JHR.
(*4) CAPEX is categorized based on an outline and detail is individually stipulated in the lease contract of each hotel.
(*5) Classified based on a lease contract that will be renewed on April 1, 2023.

37

Total

–

5. Property List (1/2)(as of February 22, 2023)
Appraisal ValueNo.

Property Name

Hotel Type
(*1)

Grade
(*2)

No. of
Guest
Rooms

LocationAge(*3)

Acquisition
Price(JPY MM)(*4)

Book Value(JPY MM)(*5)

23rd Period(as of June 30, 2022)

23rd Period(as of December 31, 2022)

Appraisal
Value(JPY MM)CAP Rate

Appraisal
Value(JPY MM)CAP Rate

Investment
Ratio
(*6)

Revenue from
Real Estate
Operation(JPY1,000)
(*7)

NOI
(JPY1,000)(*7)

P/L from
Real Estate
Operation(JPY1,000)(*7)

NOI Yield(estimate)(*8)

1

Kobe Meriken Park Oriental Hotel

Full-service

Upper-middle

323

Hyogo

27.6

10,9009,484

14,0004.8%

14,1004.8%

3.0%429,003

181,829(113,706)

1.7%

2Oriental Hotel tokyo bay

Full-service

Mid-price

511

Chiba

27.8

19,90016,88932,1004.4%

31,7004.4%

5.4%

833,097

714,862

383,268

3.6%

3

Namba Oriental Hotel

Limited-service

Mid-price

258

Osaka

27.0

15,00014,317

31,2004.1%

31,0004.1%

4.1%

460,814354,246

218,611

2.4%

4

Oriental Hotel Hiroshima

Full-service

Upper-middle

227

Hiroshima

29.5

4,100

4,095

4,200

4.9%

4,150

4.9%

1.1%

618,521574,851

490,32714.0%

5Hotel Nikko Alivila

ResortLuxury397

Okinawa

28.9

18,90017,66528,9004.8%

28,1004.8%

5.2%

814,249

666,558

400,870

3.5%

6

The Beach Tower Okinawa

ResortMid-price

280

Okinawa

18.9

7,610

6,420

9,960

4.4%

9,960

4.4%

2.1%

511,035

468,035

354,276

6.2%

7

Hakone Setsugetsuka

ResortMid-price

158

Kanagawa

16.4

4,070

3,558

5,260

4.9%

5,260

4.9%

1.1%

294,944

269,104

171,890

6.6%

8

Dormy Inn Kumamoto

Limited-service

Mid-price

291

Kumamoto

15.1

2,334

2,186

2,930

5.6%

2,930

5.6%

0.6%

194,460

172,498

119,580

7.4%

9the b suidobashi

Limited-service

Mid-price

99

Tokyo

36.5

1,120

1,167

2,270

4.1%

2,270

4.1%

0.3%

30,00017,900(11,322)

1.6%

10

dormy inn・global cabin Asakusa

Limited-service

Economy

75

Tokyo

25.9

999

922

1,300

4.0%

1,300

4.0%

0.3%

65,07555,801

42,394

5.6%

11

Hakata Nakasu Washington Hotel
Plaza

Limited-service

Mid-price

247

Fukuoka

28.0

2,130

2,062

4,510

4.4%

4,520

4.4%

0.6%

240,000

225,000

199,000

10.6%

12

Nara Washington Hotel Plaza

Limited-service

Mid-price

204

Nara

23.0

2,050

1,703

2,430

5.0%

2,430

5.0%

0.6%

150,000

133,000

97,000

6.5%

13

R&B Hotel Ueno-hirokoji

Limited-service

Economy

187

Tokyo

20.9

1,720

1,780

1,850

4.1%

1,800

4.1%

0.5%

97,30082,701

65,8484.8%

14

Comfort Hotel Tokyo Higashi
Nihombashi

Limited-service

Economy

259

Tokyo

15.1

3,746

3,423

5,370

4.4%

5,370

4.4%

1.0%

271,527

241,391

204,067

6.4%

15

Smile Hotel Nihombashi
Mitsukoshimae

Limited-service

Economy

164

Tokyo

25.9

2,108

2,025

2,940

4.1%

2,940

4.1%

0.6%

134,400

118,053

97,832

5.6%

16

Toyoko Inn Hakata-guchi Ekimae

Limited-service

Economy257

Fukuoka

21.5

1,652

1,364

2,760

4.5%

2,760

4.5%

0.5%

141,039

127,317

109,114

7.7%

17

Oriental Hotel Universal City

ResortMid-price

330

Osaka

21.7

6,753

7,732

17,7004.8%

17,8004.8%

1.8%

627,498

569,689

252,276

8.4%

18

Chisun Inn Kamata

Limited-service

Economy

70

Tokyo

19.8

823

779

1,370

4.6%

1,380

4.6%

0.2%

18,327

11,172(1,197)

1.4%

19

Chisun Hotel Kamata

Limited-service

Economy

105

Tokyo

31.1

1,512

1,452

2,020

4.8%

2,050

4.8%

0.4%

26,161

11,747(20,707)

0.8%

20

Hilton Tokyo Bay

ResortLuxury

828

Chiba

34.7

26,05026,10640,4004.3%

40,5004.3%

7.1%

1,980,234

1,697,831

1,506,961

6.5%

21

ibis Styles Kyoto Station

Limited-service

Mid-price

215

Kyoto

13.9

6,600

6,594

9,990

4.3%

9,990

4.3%

1.8%

71,413

41,219

6,199

0.6%

22

ibis Styles Sapporo

Limited-service

Mid-price278

Hokkaido

12.6

6,797

6,414

11,100

4.7%

11,1004.7%

1.9%

214,126

114,72133,382

1.7%

23

Mercure Sapporo

Limited-service

Mid-price285

Hokkaido

13.9

6,000

5,679

10,5004.7%

10,5004.7%

1.6%

269,073

102,917

12,776

1.7%

24

Mercure Okinawa Naha

Limited-service

Mid-price

260

Okinawa

13.6

3,000

2,807

6,940

4.7%

6,940

4.7%

0.8%

50,072

8,122(65,378)

0.3%

38

5. Property List (2/2)(as of February 22, 2023)
Appraisal ValueNo.

Property Name

Hotel Type
(*1)

Grade
(*2)

No. of
Guest
Rooms

LocationAge(*3)

Acquisition
Price(JPY MM)(*4)

Book Value(JPY MM)(*5)

23rd Period(as of June 30, 2022)

23rd Period(as of December 31, 2022)

Appraisal
Value(JPY MM)CAP Rate

Appraisal
Value(JPY MM)CAP Rate

Investment
Ratio
(*6)

Revenue from
Real Estate
Operation(JPY1,000)
(*7)

NOI
(JPY1,000)(*7)

P/L from
Real Estate
Operation(JPY1,000)(*7)

NOI Yield(estimate)
(*8)

25

the b ikebukuro

Limited-service

Mid-price

175

Tokyo

40.7

6,520

6,570

7,160

4.2%

7,180

4.2%

1.8%

478,240

448,826

422,727

6.9%

26

the b hachioji

Limited-service

Mid-price

196

Tokyo

36.6

2,610

2,701

2,560

5.1%

2,570

5.1%

0.7%

91,151

66,35830,2432.5%

27

the b hakata

Limited-service

Mid-price

175

Fukuoka

25.4

2,300

2,343

4,320

4.3%

4,320

4.3%

0.6%

66,52253,566

31,4682.3%

28

Hotel Francs

Full-service

Mid-price

222

Chiba

31.5

3,105

3,142

4,040

4.7%

4,100

4.7%

0.8%

300,000

237,496

190,018

7.6%

29

Mercure Yokosuka

Full-service

Mid-price

160

Kanagawa

29.3

1,650

1,629

3,360

4.6%

3,240

4.6%

0.5%

231,678

119,833

82,1507.3%30Oriental Hotel Okinawa Resort & Spa

ResortUpper-middle

361

Okinawa

18.0

14,95015,756

17,8004.9%

17,900

4.9%

4.1%

199,587

116,666(216,280)

0.8%

31

ACTIVE-INTER CITY HIROSHIMA(Sheraton Grand Hiroshima Hotel)

Full-service

Luxury238

Hiroshima

12.5

17,32017,19020,7004.6%

20,7004.6%

4.7%

1,127,826

667,870443,648

3.9%

32

CANDEO HOTELS UENO-KOEN

Limited-service

Mid-price

268

Tokyo

13.2

6,705

6,548

7,440

4.0%

7,460

4.0%

1.8%

349,971324,257

283,716

4.8%

33

Oriental Hotel Fukuoka Hakata Station

Full-service

Upper-middle

221

Fukuoka

37.6

7,197

8,879

15,200

4.6%

15,0004.6%

2.0%612,861

366,013(20,010)5.1%

34

Holiday Inn Osaka Namba

Limited-service

Mid-price

314

Osaka

14.5

27,00026,672

26,5004.3%

26,600

4.3%

7.4%

213,149

164,068

44,4630.6%

35Hotel Oriental Express Fukuoka Tenjin

Limited-service

Mid-price

263

Fukuoka

23.8

5,248

5,828

6,620

4.7%

6,520

4.7%

1.4%

286,257

190,023

93,192

3.6%

36Hilton Nagoya

Full-service

Luxury

460

Aichi

34.0

15,25015,56014,8004.2%

14,9004.2%

4.2%

1,037,215

389,134

208,057

2.6%

37

Hilton Tokyo Narita Airport

Full-service

Upper-middle

548

Chiba

29.6

13,175

13,247

13,500

4.6%

12,3004.6%

3.6%

228,202

147,855(59,155)

1.1%

38International Garden Hotel Narita

Full-service

Mid-price

463

Chiba

26.7

9,125

9,050

9,520

4.8%

9,080

4.8%

2.5%

212,497

168,854

8,015

1.9%

39

Hotel Nikko Nara

Full-service

Upper-middle

330

Nara

25.0

10,373

10,135

9,870

4.8%

9,500

4.8%

2.8%

178,567

130,291(18,044)

1.3%

40

Hotel Oriental Express Osaka
Shinsaibashi

Limited-service

Mid-price

124

Osaka

5.1

2,738

2,804

2,890

4.7%

2,890

4.7%

0.7%

–

(14,078)(30,138)(0.5%)

41

Hilton Tokyo Odaiba

Full-service

Upper-middle

453

Tokyo

27.1

62,40063,36967,8003.7%

68,000

3.7%

17.1%

722,054

391,085

89,886

0.6%

42

UAN kanazawa (*9)

Limited-service

Upper-middle

47

Ishikawa

5.4

2,050

–

–

–

–

–

0.6%

–

–

–

–

–

–

11,326–24.6

365,592

358,067

486,080–

483,110–100.0%

14,879,363 10,929,748 6,138,573

3.0%

Total or Average(*1) Under the category of Hotel Type, "Full-service" is full-service hotel, "Resort" is resort hotel, and "Limited-service" is limited-service hotel.
(*2) Mainly based on ADR, etc., JHR has classified the hotels into four categories as "luxury," "upper-middle," "mid-price," and "economy."(*3) The age of each property as of February 22, 2023. Average age: Weighted average calculated as follows. The sum of (acquisition price of each property x property age)/total acquisition price.
(*4) The acquisition price in the Purchase & Sale Agreement for the Beneficial Interest in Trust or real estate is indicated. (Consumption tax, amount equivalent to consumption tax, brokerage fee, and other purchase-related costs are excluded.)(*5) Book value as of the end of December 2022.
(*6) The "Investment Ratio" column shows the ratio of the acquisition price of each property to the total acquisition price of properties held as of February 22, 2023, rounded to one decimal place.
(*7) Actual for 12 months from January to December 2022. Since the lessees did not agree to disclose numbers in units of JPY1,000 for No. 11 and 12, amounts are rounded down to the nearest JPY million.
(*8) NOI yield for the portfolio is calculated as follows: Total NOI for FY12/2022 (actual) (10,963,357 thousand yen)/total acquisition price of properties held as of the end of FY12/2022.
(*9) Since the property was acquired on January 31, 2023, the book value, appraisal value, and revenue from real estate operation, NOI, P/L from real estate operation, and NOI yield are not stated and are not included in the total or average figures.

39

6. Summary of Lease Contracts (1/3)(as of February 22, 2023)
No.

Property Name

Lease
Type

Rent
Structure(*1)

LesseeHotel Operator/
Lease/ Expiration
Hotel Consulting andMC
Date ofManagement Company Term Contract

Contractual Rent(*2)

1

Kobe Meriken Park Oriental Hotel【2022】 Hotel AGOP x 86%(If the AGOP is below JPY0, it will be JPY0)【2023】 For The Five HMJ Hotels JPY3,221MM/
year + when Hotel AGOP exceeds JPY4,120MM,
the excess x 85% is paid

2

Oriental Hotel tokyo bay【2022】 Hotel AGOP x 79%(If the AGOP is below JPY0, it will be JPY0)【2023】 For The Five HMJ Hotels JPY3,221MM/
year + when Hotel AGOP exceeds JPY4,120MM,
the excess x 85% is paid

Hotel Management Japan Co., Ltd.
Fixedlease

Fixed +
Variable3

Namba Oriental Hotel

4

Oriental Hotel Hiroshima

5

Hotel Nikko Alivila

6

The Beach Tower Okinawa

Fixedlease

7

Hakone Setsugetsuka

Fixedlease

Fixed

8

Dormy Inn Kumamoto

Fixedlease

Fixed +
Variable

9

dormy inn・global cabin Asakusa

Lease

10

Hakata Nakasu Washington Hotel
Plaza

11

15

Rent Modification Summary【2022】Hotel AGOP x 91%
In principle, the same rent will
(If the AGOP is below JPY0, it will be JPY0)
be applied until expiration of
Dec. 2034 【2023】 For The Five HMJ Hotels JPY3,221MM/
year + when Hotel AGOP exceeds JPY4,120MM, the contract.
the excess x 85% is paid

Rent Modification Summary(After acquisition)

Rent Modification Schedule(2023 to 2024)

TimingCondition

2023

2024

Jan. 2023

Modified Structure––【2022】 Hotel AGOP x 89%(If the AGOP is below JPY0, it will be JPY0)【2023】 For The Five HMJ Hotels JPY3,221MM/
year + when Hotel AGOP exceeds JPY4,120MM,
the excess x 85% is paid
【2022】 Hotel AGOP x 74%(If the AGOP is below JPY0, it will be JPY0)【2023】 For The Five HMJ Hotels JPY3,221MM/
year + when Hotel AGOP exceeds JPY4,120MM,
the excess x 85% is paid

Okura Nikko HotelManagement Co., Ltd.

Jun. 2026 JPY42MM/month

The same rent will be applied
until expiration of the contract.

–

–

–

–

20

Oct. 2026 JPY24MM/month

The same rent will be applied
until expiration of the contract.

–

–

–

–

3

Mar. 2026

Rent can be modified throughmutual agreement every three
years.

Apr. 2020

Same(Introduced variable rent)

Renewed(Mar.)

–

Fixed

3

Mar. 2023 JPY5MM/month

Rent can be modified throughmutual agreement every three
years.

Apr. 2020

Same

To be expired(Mar.)

–

Lease

Fixed

3

Mar. 2024 JPY20MM/month

Rent can be modified throughmutual agreement.

Apr. 2021

Same–

To be expired(Mar.)

Nara Washington Hotel Plaza

Lease

Fixed

3

Mar. 2023 JPY11MM/month

Rent can be modified throughmutual agreement.

Mar. 2020

Same

To be expired(Mar.)–

12

R&B Hotel Ueno-hirokoji

Lease

Fixed

20

Apr. 2025 JPY8MM/month

Rent can be modified throughmutual agreement.

Apr. 2011

Increased(+3.0%)––

13

Comfort Hotel Tokyo Higashi
Nihombashi

Fixedlease

Fixed +
Revenuesharing

Greens Co., Ltd.

20

Jan. 2028 JPY21MM/month + Revenue sharing

Rent can be modified throughmutual agreement every five
years.

Apr. 2018

Same(Introduced
revenue sharing)

–

–

14

Smile Hotel Nihombashi
Mitsukoshimae

Lease

Fixed +
Revenuesharing

THE KAMOGAWA GRAND HOTEL, LTD.

3

Mar. 2023 JPY11MM/month + Revenue sharing

Rent can be modified throughmutual agreement.

Mar. 2020

Same

To be expired(Mar.)–

15

Toyoko Inn Hakata-guchi Ekimae

Lease

Fixed

Toyoko Inn Co., Ltd.

30

Sep. 2031 JPY11MM/month

No rule has been stipulated.

Oct. 2007

Increased(+9.4%)––

Oriental Hotel Universal City

Fixedlease

Fixed +
Variable

In principle, the same rent will
be applied until expiration of
the contract.

Jul. 2021

Change in lessee andModified Structure

–

–

16

Fixed

20

Kyoritsu Maintenance Co., Ltd.

Washington Hotel K.K.

K.K. Osaka Sakurajima Operations

JPY16MM/month + when Hotel GOP exceeds
JPY400MM, the excess x 40% is paid

JPY350MM/year + when Hotel AGOP exceeds
JPY370MM, the excess x 95% is paid (Fixed
10.5 Dec. 2031 rent payments from June 2021 to June 2022
are waived. The starting date for calculation ofvariable rent is January 1, 2022.)40

6. Summary of Lease Contracts (2/3)(as of February 22, 2023)
No.

17

Property Name

Chisun Inn Kamata

Lease
Type
Fixedlease

Rent
Structure(*1)

Hotel Operator/
Lease/ Expiration
Hotel Consulting andMC
Date ofManagement Company Term Contract

LesseeVariable
Solare Hotels &Resorts Co., Ltd.

18

Chisun Hotel Kamata

Fixedlease

Variable

19

Hilton Tokyo Bay

Fixedlease

Fixed +
Revenuesharing

20

ibis Styles Kyoto Station–

Management
contract

21

ibis Styles Sapporo–

Management
contract

THE DAI-ICHI
BUILDING CO., LTD.

–

Contractual Rent(*2)

Rent Modification Summary

Rent Modification Summary(After acquisition)

Rent Modification Schedule(2023 to 2024)

TimingCondition

2023

2024

–

Jan. 2020

Same

–

–

–

Jan. 2021

Change in lessee andModified Structure––

Rent can be modified throughmutual agreement.

Jan. 2019

Renewed(Increased)––

Dec. 2024 Amount equivalent to hotel GOP

–

–

–

–

To be expired(Dec.)

10

Dec. 2024 Amount equivalent to hotel GOP

–

–

–

–

To be expired(Dec.)

7

Hotel GOP x 86%
Dec. 2026(If the amount is below JPY0, it will be JPY0)5

Dec. 2025

Hotel GOP x 86%(If the amount is below JPY0, it will be JPY0)6

Dec. 2028 JPY163MM/month + Revenue sharing

12

SHR Hotels, Co., Ltd.

Hilton International
Company

AAPC Japan K.K.

22

Mercure Sapporo–

Management
contract

15

Sep. 2029 Amount equivalent to hotel GOP

–

–

–

–

–

23

Mercure Okinawa Naha–Management
contract

10

Apr. 2024 Amount equivalent to hotel GOP

–

–

–

–

To be expired(Apr.)

24

Mercure Yokosuka

Fixedlease

Variable

AAPC Japan K.K.

5

Aug. 2024 Linked to hotel GOP

The same rent will be applied
until expiration of the contract.

Aug. 2019

Renewed(Increased)–

To be expired(Aug.)

25

the b ikebukuro

Fixedlease

Fixed +
Variable

Ishin Ikebukuro Operations K.K.

9.5

Jul. 2024【2021】JPY38MM/year + Linked to hotel AGOP
【2022】JPY80MM/year + Linked to hotel AGOP

The same rent will be applied
until expiration of the contract.

Oct. 2020

Fixed rent was changed(Reduction)–

To be expired(Jul.)

26

the b hachioji

Fixedlease

Fixed +
Variable

Ishin Hachioji Operations, Y.K.

9.5

Jul. 2024【2021】JPY21MM/year + Linked to hotel AGOP
【2022】JPY45MM/year + Linked to hotel AGOP

The same rent will be applied
until expiration of the contract.

Oct. 2020

Fixed rent was changed(Reduction)–

To be expired(Jul.)

27

the b hakata

Fixedlease

Fixed +
Variable

Ishin Hakata Operations K.K.

9.5

Jul. 2024【2021】JPY28MM/year + Linked to hotel AGOP
【2022】JPY59MM/year + Linked to hotel AGOP

The same rent will be applied
until expiration of the contract.

Oct. 2020

Fixed rent was changed(Reduction)–

To be expired(Jul.)

28

the b suidobashi

Fixedlease

Fixed +
Variable

Ishin Suidobashi Operations K.K.

5

Dec. 2026【2021】JPY13MM/year + Linked to hotel AGOP
【2022】JPY30MM/year + Linked to hotel AGOP

The same rent will be applied
until expiration of the contract.

Oct. 2020

Fixed rent was changed(Reduction)

–

–

29

Hotel Francs

Fixedlease

Fixed

K.K. BP19

Oct. 2024 JPY25MM/month

The same rent will be applied
until expiration of the contract.

–

–

–

To be expired(Oct.)

30

Oriental Hotel Okinawa Resort &Spa

Fixedlease

Fixed +
Variable

Lagoon resort Nago Co., Ltd.

10

Dec. 2030【2022】Hotel AGOP x 89%(If the amount is below JPY0, it will be JPY0)【2023】JPY550MM/year + when Hotel AGOP
exceeds JPY655MM, the excess x 95% is paid

In principle, the same rent will
be applied until expiration of
the contract.

Jan. 2023

Modified Structure

–

–

31

ACTIVE-INTER CITY HIROSHIMA(Sheraton Grand Hiroshima Hotel)

Fixedlease

Fixed +
Variable

Luxury Hotels
International of
Hong Kong Limited

11

Dec. 2026【2022】Hotel AGOP x 93%(If the amount is below JPY0, it will be JPY0)【2023】JPY348MM/year + when Hotel AGOP
exceeds JPY360MM, the excess x 90% is paid

In principle, the same rent will
be applied until expiration of
the contract.

Jan. 2023

Modified Structure

–

–

32

CANDEO HOTELS UENO-KOEN

Fixedlease

Fixed

Candeo Hospitality Management, Inc.

20

Feb. 2030 Nondisclosure(*3)

Rent can be modified throughmutual agreement every three
years.

Jul. 2016

Nondisclosure(*3)

–

–

33

Oriental Hotel Fukuoka Hakata
StationFixedlease

Fixed +
Variable

Hotel Centraza Co., Ltd.

15

Dec. 2034

In principle, the same rent will
be applied until expiration of
the contract.

Jan. 2023

Modified Structure––

K.K. A.I.C Hiroshima
Management【2022】Hotel AGOP x 97%(If the amount is below JPY0, it will be JPY0)【2023】JPY425MM/year + when Hotel AGOP
exceeds JPY442MM, the excess x 98% is paid41

6. Summary of Lease Contracts (3/3)(as of February 22, 2023)
No.

Property Name

Lease
Type

Rent
Structure(*1)

LesseeHotel Operator/
Lease/ Expiration
Hotel Consulting andMC
Date ofManagement Company Term Contract

34

Holiday Inn Osaka Namba

Fixedlease

Fixed +
VariableOW Hotel Operations KK

35Hotel Oriental Express Fukuoka
TenjinFixedlease

Fixed +
Variable

K.K Fukuoka Tenjin Operations

36

Hilton Nagoya

Lease

Variable

37

Hilton Tokyo Narita Airport

Fixedlease

Fixed +
Variable

38

International Garden Hotel Narita

Fixedlease39

Hotel Nikko Nara

40

Nagoya Hilton Co.,Ltd.

Hilton International
Company

15

Contractual Rent(*2)

【2022】Hotel AGOP x 98%(If the amount is below JPY0, it will be JPY0)
Oct. 2031【2023】JPY576MM/year + when Hotel AGOP
exceeds JPY580MM, the excess x 97% is paid

JPY150MM/year + when Hotel AGOP exceeds
JPY165MM, the excess x 97% is paid (Fixed
10.5 Dec. 2031 rent payments from June 2021 to June 2022 iswaived. The starting date for calculation ofvariable rent is January 1, 2022.)

Rent Modification Summary

Rent Modification Summary(After acquisition)

Rent Modification Schedule(2023 to 2024)

TimingCondition

2023

2024

In principle, the same rent will
be applied until expiration of
the contract.

Jan. 2023

Modified Structure––

In principle, the same rent will
be applied until expiration of
the contract.

Jun. 2021

Change in lessee andModified Structure––

Rent can be modified throughmutual agreement.

–

–

–

–

41

Dec. 2029 Nondisclosure(*3)

KK NaritaKosuge Operations

20

Jun. 2037【2022】Hotel AGOP x 95%(If the amount is below JPY0, it will be JPY0)【2023】JPY444MM/year + when Hotel AGOP
exceeds JPY450MM, the excess x 93% is paid

In principle, the same rent will
be applied until expiration of the Jan. 2023
contract.

Modified Structure––

Fixed +
Variable

KK NaritaYoshikura Operations

10

Jun. 2027【2022】Hotel AGOP x 95%(If the amount is below JPY0, it will be JPY0)【2023】JPY336MM/year + when Hotel AGOP
exceeds JPY360MM, the excess x 98% is paid

In principle, the same rent will
be applied until expiration of
the contract.

Jan. 2023

Modified Structure––

Fixedlease

Fixed +
Variable

Hotel Management
Okura Nikko Hotel
Co., Ltd.
Management Co., Ltd.

10

Dec. 2030【2022】Hotel AGOP x 95%(If the amount is below JPY0, it will be JPY0)【2023】JPY420MM/year + when Hotel AGOP
exceeds JPY440MM, the excess x 95% is paid

In principle, the same rent will
be applied until expiration of
the contract.

Jan. 2023

Modified Structure––

Hotel Oriental Express Osaka
Shinsaibashi

Fixedlease

Fixed +
Variable

K.K. HOTEL ORIENTAL EXPRESS

10

Mar. 2028【2022】Hotel AGOP x 87%(If the amount is below JPY0, it will be JPY0)【2023】JPY110.4MM/year + when Hotel AGOP
exceeds JPY128MM, the excess x 91% is paid

In principle, the same rent will
be applied until expiration of
the contract.

Jan. 2023

Modified Structure

–

–

41

Hilton Tokyo Odaiba

Fixedlease

Fixed +
Variable

Tokyo Humania Enterprise Inc.

11

Dec. 2029【2022】Hotel AGOP x 97%(If the amount is below JPY0, it will be JPY0)【2023】JPY1,600MM/year + when Hotel AGOP
exceeds JPY1,660MM, the excess x 98% is paid

In principle, the same rent will
be applied until expiration of
the contract.

Jan. 2023

Modified Structure

–

–

42

UAN kanazawa

Fixedlease

Fixed +
Revenuesharing25

Oct. 2042

JPY9MM/month + when annual room revenue
exceeds JPY270MM, the excess x 30% is paid

In principle, the same rent will
be applied until expiration of
the contract.

–

–

–

–

Solare Hotels andResorts Co., Ltd.

SHR Hotels Co., Ltd.

(*1) Rent structure is as follows:
Fixed: Fixed rent
Variable: Variable rentManagement contract: Management contract
Fixed + Variable: Property paying both fixed and variable rent
Fixed + Revenue sharing: When the sales of the hotel exceed pre-determined amount, additional rent is paid(*2) Amount including car park and CAM without tax.
(*3) The detailed content of the contract is not disclosed as consent on disclosure has not been obtained from the lessee.

42

7. Portfolio Map
 Portfolio consisting of competitive hotels in areas with strong leisure lodging demand Selectively invest in locations with high growth potential of leisure demand such as Strategic Investment Areas(as of February 22, 2023)

Total Assets

JPY365.5Bn

1Strategic Investment Areas

4

5

6

7

8

9

Oriental Hoteltokyo bay

Namba
Oriental Hotel

Oriental Hotel
Hiroshima

HakoneSetsugetsuka

Dormy Inn
Kumamoto

the bsuidobashi

13

14

15

16

17

18

Comfort HotelTokyo Higashi
Nihombashi

Smile Hotel
Nihombashi
Mitsukoshimae

Toyoko Inn
Hakata-guchi
EkimaeOriental Hotel
Universal City

Chisun Inn
KamataLimited-service hotel

42 Hotels

Full-service hotel

22 23

Resort hotel

Kobe Meriken Park
Oriental Hotel

10

11

12

dormy inn・
global cabin
Asakusa

Hakata Nakasu
Washington
Hotel PlazaNara Washington R&B Hotel
Hotel Plaza
Ueno-hirokoji

Hotel Nikko Alivila The Beach
Tower Okinawa

Hokkaido Area

No. of Guest Rooms

11,326 Rooms
42
26

21

3 17 34 40

20

21

22

23

24

25

26

Chisun Hotel
KamataHilton Tokyo Bay

ibis Styles
Kyoto Station

ibis Styles
SapporoMercureSapporoMercureOkinawa Naha

the b ikebukuro

the b hachioji

29

27

28

29

30

the b hakata

Hotel Francs

MercureYokosuka

Oriental Hotel
ACTIVE-INTER CITY
Okinawa Resort & Spa HIROSHIMA (Sheraton
Grand Hiroshima Hotel)

28
37 38

7

Fukuoka
Area
11 16
27 33 35

19

Tokyo & Bay Area

Osaka/Kyoto Area

2 20

31

32

33

34

Oriental Hotel
Fukuoka
Hakata Station

Holiday Inn
Osaka Namba

36
12 39

8
4 31

1

Tokyo 23 wards
25
9

30

24

3

Existing properties

No. of Hotels

5

2

13 32

10
14

CANDEOHOTELS
UENO-KOEN

Acquisition in 2023

35

36

37

38

39

40

41

42

Hotel Oriental
Express
Fukuoka Tenjin

Hilton Nagoya

Hilton Tokyo
Narita Airport

International
Garden Hotel
NaritaHotel Nikko Nara

Hotel Oriental
Express Osaka
Shinsaibashi

Hilton Tokyo Odaiba

UAN kanazawa

15

6

41
18 19

43

8. Balance Sheet(Unit: JPY MM)
FY12/2021
End ofFiscal Year(as of) December 31,
2021

FY12/2022
End ofFiscal Year
December 31,
2022

FY12/2021
End ofFiscal Year(as of) December 31,
2021

FY12/2022
End ofFiscal Year
December 31,
2022

Variance

41,26554,165

12,900

1,426

1,943

516

24,00235,113

11,111

Current Portion of Investment Corporation Bond

6,000

ー

(6,000)Current Portion of Long-term Loans Payable

8,434

15,432

6,998
258

Variance

ASSETSLIABILITIES

32,64034,553

1,912

30,296

29,515(781)

Operating Accounts Payable

1,750

4,442

2,692

Short-term Loans

593

595

1

361,531

362,115584

Net Property and Equipment

326,143

325,988(154)

Accounts Payable

712

970

Buildings in Trust(*2)

111,807111,217(589)

Advances Received

658

664

5

Land in Trust

212,263

212,263

ー

31

42

10

Others(*3)

2,073

2,508

434

131,516

119,059(12,456)

Intangible Assets

32,70432,494(210)

Investment Corporation Bonds

34,10036,900

2,800

2,683

3,632

949

Long-term Loans Payable

92,21876,786(15,432)

4,654

4,660

5

Current Assets
Cash and Deposits(*1)
Operating Accounts Receivables
OthersNoncurrent Assets

Other Assets

152

152

ー

Others

2,531

3,480

Deferred Assets

151

130

Leasehold and Security Deposits

Current Liabilities

OthersLong-term Liabilities

Tenant Leasehold and Security Deposits

949

Derivative Liabilities

202

ー

(202)

(20)

Others

340

713

373

172,781

173,225443

187,194

187,194

ー

Capital Surplus

21,746

21,746ーReserve for Temporary Difference Adjustment

10,311

9,976

(335)

Reserve for Special Advanced Depreciation

1,174

1,174

ー

Unappropriated Retained Earnings

1,300

2,672

1,372

Others

(185)

809

995

221,542

223,574

2,032

394,323

396,799

2,476

TOTAL LIABILITIESNET ASSETS
Unitholders' Capital

TOTAL NET ASSETSTOTAL ASSETS

394,323

396,799

2,476

TOTAL LIABILITIES AND NET ASSETS(*1) Cash and deposits in trust is included.
(*2) The sum of buildings in trust, structures in trust, machinery and equipment in trust, tools, furniture and fixtures in trust, and construction in progress in trust.
(*3) The sum of machinery and equipment, tools, furniture and fixtures, and construction in progress.

44

Appendix 3
Investors Composition and Investment Unit Price1. Major Unitholders and Classifications of Unitholders
Top 10 Major Unitholders
As of the end of June 2022

As of the end of December 2022

Name

Rank

No. of Units

%(*)

Rank

Name

No. of Units

%(*)

1

The Master Trust Bank of Japan, Ltd. (Trust)

757,896

16.96

1

The Master Trust Bank of Japan, Ltd. (Trust)

815,025

18.24

2

Custody Bank of Japan, Ltd. (Trust)

664,123

14.86

2

Custody Bank of Japan, Ltd. (Trust)

731,291

16.37

3

The Nomura Trust and Banking Co., Ltd. (Investment Trust)

217,5404.86

3232,834

5.21

4

SDSS K INVESTCO LIMITED

117,567

2.63

4

107,498

2.40

5

BNYM AS AGT/CLTS 10 PERCENT

80,7131.80

5The Nomura Trust and Banking Co., Ltd. (Investment Trust)
THE CHASE MANHATTAN BANK, N.A. LONDON SPECIALACCOUNT NO.1
JPMorgan Securities Japan Co., Ltd.

80,460

1.80

6STATE STREET BANK CLIENT - TREATY 505234

70,215

1.57

6

BNYM AS AGT/CLTS 10 PERCENT

75,875

1.69

7

STATE STREET BANK AND TRUST COMPANY 505103

68,416

1.53

7State Street Bank and Trust Company 505223

73,811

1.65

8

GOLDMAN SACHS INTERNATIONAL

64,230

1.43

8STATE STREET BANK CLIENT - TREATY 505234

73,503

1.64

9SSBTC CLIENT OMNIBUS ACCOUNT

62,291

1.39

9

STATE STREET BANK AND TRUST COMPANY 505103

68,691

1.53

58,895

1.31

10 SSBTC CLIENT OMNIBUS ACCOUNT

68,5991.53

2,161,886

48.39

2,327,587

52.10

10 JP MORGAN CHASE BANK 385781
Total

Total

(*) Ownership ratio shows the total units held by each investor to the total units issued by JHR as of the end of June 2022 and the end of December 2022, respectively (rounded down to two decimal places).

Classifications of Unitholders
As of the end of June 2022
OwnersNo. ofInvestors

No. ofUnits

Individuals & Others

30,013397,277

Financial Institutions(Incl. Securities Firms)

72

1,772,086

Other Domestic Firms

367

116,608

Foreign Firms &Individuals
Total

491

2,181,035

30,943 4,467,006

No. of Investors

As of the end of December 2022

No. of Units

0.2% 1.1%
1.5%

8.8%

48.8%

39.6%

96.9%

No. ofInvestors

No. ofUnits

Individuals & Others

26,688341,673

Financial Institutions(Incl. Securities Firms)

77

2,074,883

Other Domestic Firms

323

112,158

Foreign Firms &Individuals

485

1,938,292

Total

2.6%
Individuals &OthersOwnersFinancial Institutions(Incl. Securities Firms)

Other Domestic
Firms

27,573 4,467,006

No. of Investors

No. of Units

0.2% 1.1%
1.7%

7.6%

43.3%

46.4%

96.7%
2.5%

Foreign Firms &Individuals(*) Percentage of investors is percentage of investors in each segment to the total number of investors in JHR, and percentage of investment units is percentage of investment units owned by each segment to the total investment units issued as ofrespective date (both rounded down to one decimal place).

46

2. Changes in Investment Unit Price and Market Capitalization
Changes in the investment unit priceand market capitalization(Based on the closing price)
Price of the investment unit:

JPY82,200

Total market capitalization:

JPY367.1Bn

Market Capitalization
Investment Unit Price of JHR(JPY)
120,000

100,000(based on the closing price of January 31, 2023)(*1) Price of the real estate investment securities
may fall depending on the fluctuations of priceof the real estate under management or
profitability, etc., and investors may suffer
losses. Investors may also suffer losses
through the bankruptcy or deteriorated
financial condition of the issuer.
(*2) Including OA(*3) Indicate the third-party allotment conducted
March 2021, with sponsor group as allottee.

Comparison withREIT Index and TOPIX of
Tokyo Stock Exchange(TSE)(*) 100 is the closing price of JHR unit, REIT index
and TOPIX at TSE dated April 2, 2012. REIT
Index of TSE is an index of a weighted
average of the market capitalization of all
REITs listed on TSE.

80,00060,000Sep. 2014
PO JPY10.1Bn

Jun. 2015
Jan. 2016
Jun. 2017
Jan. 2019
Mar. 2021
PO(*2) JPY10.7Bn PO(*2) JPY14.6Bn PO(*2) JPY18.6Bn PO(*2) JPY33.3Bn TPA(*3) JPY0.3Bn(JPY MM)

Jan. 2015
PO(*2) JPY15.6Bn

Jul. 2016
PO(*2) JPY34.7Bn

Apr. 2013
PO JPY20.5Bn

450,000

300,000

Sep. 2012
PO(*2) JPY5.0Bn
150,000

40,00020,0000600

0Investment Unit Price of JHR

TSE REIT Index

500

400

300

200

100

0

47

TOPIX

Appendix 4
Summary of the Asset Management Company

1. Summary of the Asset Management Company(as of December 31, 2022)
Company Name
Location
Establishment
CapitalShareholders
Representative Director

Japan Hotel REIT Advisors Co., Ltd.
Ebisu Neonato 4F, 4-1-18 Ebisu, Shibuya-ku, Tokyo 150-0013
August 10, 2004
JPY300MMSCJ One (S) Pte. Ltd., Kyoritsu Maintenance Co., Ltd., ORIX Corporation
Hisashi Furukawa
Building Lots and Buildings Transaction Business Operator, Governor of Tokyo (4) No. 83613

Registration and Licenses

Discretionary Transaction Agent by Minister of Land, Infrastructure, Transport and Tourism No. 38
Financial Instruments Business Operator, Director-General of Kanto Local Finance Bureau No. 334
Member of The Investment Trusts Association, Japan
Member of The Japan Investment Advisers Association<Organization Chart>

Shareholders Meeting
AuditorInvestment and Operation
Committee

Board of Directors
Compliance Committee
President & CEO
Compliance Office
Personnel &Administration Group

Business Promotion OfficeFinance and Planning
Division

Investment Division
Acquisitions Group

Public REIT Group

Private Fund Group

Planning Group49

Finance GroupAccounting Group2. Features and Governance of the Asset Management Company
Mission Statement

Code of Conduct
We define "Challenge" and "Teamwork" as the code of conduct for a teammember at JHRA.
In achieving our mission, "connect hotels, people and future," it is essential
to pursue all possibilities and continue exploring to create added value.

We explore the possibility of hotels.

We will always pursue possibilities through "challenge" by each department
and each employee and continue to create added value throughcooperation and collaboration based on "teamwork."

We create new value and lead hotels to a bright future.
We will be the pivot to connect people with various perspectives
and a pioneer for the future of hotel industry.

Challenge

We connect hotels, people, and a bright future.

 Be a self-starter, take initiative and demonstrate
drive Set high goal and strive to achieve goals

Ideas behind the new mission statement•

Through offering opportunities to invest in hotels, we will deliver
attractiveness of hotels to many people.

•

Utilizing our unique asset management know-how and skills,
we will create new value and contribute to the development of
the hotel industry.

•

We will enhance sustainability of hotels and contribute torealizing a society that is friendly to people, local community andenvironment.

•

We will earn trust of a wide range of various stakeholders
involved in the hotel and become the pivot to bring thestakeholders into harmony.

•

We will challenge the status quo, consider all the possibilities fora better solution and become a bridge to the bright future for the
hotels and people.

 Respect creativity and innovation
 Promote challenge, free from fear of failure

Teamwork Respect teamwork and collaborate with team-mates Respect others. Respect values and opinions of others
 Promote "sharing" (idea, knowledge, information,goal, achievement, joy of achievement, lesson, etc.)
 Make effort for open, frank and sincere
communication502. Features and Governance of the Asset Management Company (cont.)
Advanced Expertise Ability to propose transaction scheme, execute transaction, and plan and execute unprecedented measures of asset
management based on in-depth understanding of hotel operation and track record of such asset management.
 Extensive experience of renovation and rebranding through collaboration with many hotel lessees and hotel operators.
 Strong and long-term relationships with a large number of hotel lessees and hotel operators.
 High analytical skills and accurate judgement capacity based on rich information and data obtained through a broad
network and high credibility.

Ensured Independence There is no seconded employee from sponsor in JHRA.
 JHRA's Board of Directors consists of part-time directors from our main sponsor, SC CAPITAL PARTNERS group, same
number of full-time directors who are not related to the sponsor, and one part-time auditor who is not related to thesponsor.
 We established a more rigorous decision-making process for transactions with sponsor-related parties. In principle, JHRA
undergoes deliberations and resolutions by the Investment and Operation Committee, the Compliance Committee which
includes an outside specialist who is authorized to dismiss proposals, and the Board of Directors Meeting of JHRA.
In addition, in cases where JHR conducts transactions with sponsor-related parties, such transactions shall be conductedupon the approval and resolution by the Board of Directors Meeting at JHR. The officers of JHR are all third parties andunrelated to the sponsor-related parties.
 Since our main sponsor, SC CAPITAL PARTNERS group is also an independent asset management company, it fully
understands and respects importance of JHRA's independency. JHRA conducts asset management business based uponits own judgement.

51

Disclaimer
This material is prepared and provided solely for the purpose of providing information and not to offer, solicit, or do business, etc. with specific products
including purchase of investment units, investment unit subscription rights, or investment corporation bonds of Japan Hotel REIT Investment Corporation("JHR") or any other particular products. If any discrepancy is identified between this translation and the Japanese original, the Japanese original shall prevail.
This material is neither a disclosure document nor an investment report required under or prepared pursuant to the Financial Instruments and Exchange Act,Act on Investment Trusts and Investment Corporations and related government ordinances, Cabinet Office regulations, listing rules by Tokyo Stock Exchange,
Regulations of The Investment Trusts Association, Japan, or other related rules and regulations.
This material contains forward-looking statements about financial conditions, operational results, and businesses of JHR, as well as plans and intentions of JHR
and its asset management company, Japan Hotel REIT Advisors Co., Ltd ("JHRA"). Such forward-looking statements involve known and unknown risks,
uncertainties, and other factors that may cause actual results or performance of JHR to materially differ from those expressed or implied forecasts. Those
forecasts are made based on JHR's present and future business strategies and assumptions relating to the political and economic circumstances surrounding
JHR in the future.
Every effort has been made to ensure the accuracy of the information contained in this material. However, there can be no assurance that the information isaccurate, complete, appropriate or fair. The information may be revised or retracted without prior notice.
Regarding the offering and trading of investment units, investment unit subscription rights or investment corporation bonds, financial institutions may charge
you pre-determined handling fees and other charges aside from the price of the investment units, investment unit subscription rights or investment corporation
bonds. Since neither JHR nor JHRA handles the offering and trading of investment units, investment unit subscription rights or investment corporation bonds,
please ask financial institutions for the amount, upper limit, and calculation methods of such fees and other charges.
JHR mainly invests in real estate-related assets, primarily hotels which are subject to change in values. Therefore, unitholders, holders of investment unit
subscription rights and investment corporation bonds may suffer losses due to economic conditions of the real estate market or securities market, economic
situations including interest rate environment, the nature of investment units, investment unit subscription rights, and investment corporation bonds,
dependency on mechanisms and related persons of investment corporations, changes in legal systems related to real estate (include tax regulations, building
regulations and others), damage caused to the real estate-related assets by natural disasters, fluctuation in prices or profitability of the real estate-related
assets, nature of the trust beneficiary rights under management, delisting of the investment units, or worsening financial position or insolvency of JHR.
For details, please refer to the Articles of Incorporation, Securities Registration Statement, Annual Securities Report and Extraordinary Report, etc. of JHR.
The contents of this material may not be copied or reproduced without our prior permission.
Japan Hotel REIT Advisors Co., Ltd.
Financial Instruments Trading Company
Director-General of Kanto Local Finance Bureau No. 334
Member of The Investment Trust Association, Japan
Member of The Japan Investment Advisers Association

52

Memo

53